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THE  UNIVERSITY 
OF  CALIFORNIA 

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IN   MEMORIAM 
MRS.    ALFRED  W.     I NGALLS 


r 


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CASES  ON  THE  LAW 


OF 


BILLS,  NOTES,  AND  CHEQUES. 


To  accompany  this  volume. 

THE  LAW   OF  BILLS,  NOTES,  AND   CHEQUES.     Second 
Edition.     By  Melville  M.  Bigelow,  Ph.D. 


L' 


CASES 


ON 


THE  LAW  OF  BILLS,  NOTES, 
AND  CHEQUES 


BY 

MELVILLE   M.  BIGELOW 


Second  Edition 


FRANK  LESLIE   SIMPSON,  A.B.,  LL.B., 

INSTKUCTOE  IN  BOSTON  UNIVEBSITY  LaW  SCHOOL 


BOSTON 

LITTLE,   BROWN,   AND   COMPANY 

1905 


Copyright,  1894, 
By  Mki-ville  M.  Bigelow. 

Copyright,  1905, 
By  Fkank  L.  Simpson. 


THE    UNIVERSITY    PRESS,   CAMBRIDGE,   U.S.A. 


NOTE. 

The  first  edition  of  the  Cases  on  the  Law  of  Bills,  Notes,  and 
Cheques  was  prepared  more  particularly  to  accompany  and  illus- 
trate the  work  on  that  subject  by  Melville  M.  Bigelow,  LL.  D.,  and 
was  not  suited  fully  for  the  use  of  students  in  the  class-room  as  a 
basis  of  study.  The  present  edition,  made  necessary  by  the  re- 
vision of  the  text-book,  and  by  the  codification  of  the  subject,  has 
been  prepared,  following  the  order  of  the  revised  text,  especially 
for  such  use.  Accordingly,  it  has  been  necessary  to  enlarge  the 
book  greatly  by  the  addition  of  many  cases  ;  and  this  has  been 
done  with  the  aim  to  collect  a  set  of  illustrative  cases  which  shall 
present  as  comprehensive  a  view  of  the  subject  as  can  be  treated 
in  a  course  in  school. 

The  plan  of  the  book  is  to  lead  the  student,  in  his  study,  to 
look  upon  the  law  of  the  subject  from  the  standpoint  of  the  law 
merchant ;  accordingly,  cases  have  been  selected,  when  possible, 
which  put  in  the  foreground  the  customs  of  merchants  and 
bankers  as  the  basis  of  decision.  The  head-notes  to  the  cases  are 
aimed  to  enforce  the  point,  and,  at  the  same  time,  to  present  a 
concise  and,  as  far  as  possible,  a  continuous  statement  of  princi- 
ples and  rules,  which  are  illustrated  by  the  cases. 

No  attempt  has  been  made  to  prepare  a  complete  annotation  of 
the  law  of  commercial  paper,  and,  in  so  far  as  notes  have  been 
added  or  citations  given  to  the  Statute  or  the  authorities,  the 
purpose  has  been  to  aid  in  bringing  the  student  to  a  right  point 
of  view,  and  at  the  same  time  developing  a  working  knowledge 
of  the  law  as  it  is.  Much  stress  is  laid  upon  the  necessity  of 
right  theory  as  the  starting-point  of  study. 


vi  NOTE. 

This  plan  has  the  approval  of  Dr.  Bigelow,  by  whom  the  editor 
was  chosen  to  prepare  the  present  edition. 

As  to  the  study  of  cases,  a  word  of  suggestion  may  be  added 
in  the  language  of  Dr.  Bigelow  in  his  note  to  the  first  edition  : 

"  The  report  of  a  case  usually  consists  of  five  separable  parts ; 
and  to  bring  about  the  best  results  the  report  should  be  studied 
accordingly,  part  by  part,  in  natural  order.  The  parts,  and  their 
order  of  sequence,  are  these  :  — 

1.  Nature  of  the  action  (e.  (/.,  indorsee  against  maker  of  a 
note). 

2.  Essential  facts. 

3.  Point  or  points  in  dispute. 

4.  Decision  (e.  g.,  instrument  not  negotiable). 

5.  Ground  of  decision. 

Taking  up  the  work  accordingly,  tlie  student  should  not  leave 
a  case  until  he  can  state  it,  without  hesitation,  clearly  and 
effectively,  from  beginning  to  end." 


F.  L.  S. 


Boston  University  Law  School, 
September,  1905. 


CONTENTS. 


Page 

Cases  Reported xi 

Statutes  Reported xiv 


CHAPTER  I. 


Law  Merchant 1 

Law  Merchant 1 

Consideration 8 


CHAPTER  n. 

Delivery - 21 

Transfer  :  Nature 21 

Delivery  by  Negligence 23 

Delivery  by  Agent 28 

Delivery  on  Condition 30 


CHAPTER  HI. 

Form  and  Requisites 40 

Written  Promise 40 

Written  Order 42 

Money 43 

Certainty 45 

Certainty  of  Sum 47 

Certainty  of  Time 53 

The  Payee 54 


CHAPTER  IV. 

Maker's  Contract 60 

Signature  by  Representative 60 

Anomalous  Signature  of  Stranger 71 

Nature  of  the  Contract 83 


YIII 


CONTENTS. 


CHAPTER  V. 

Pagk 

Acceptor's   Contract 85 

Drawee's  Liability  before  Acceptance ,  85 

Kinds  of  Acceptance 87 

Acceptance  l*roper 87 

AVlio  may  Accept 88 

Virtual  Acceptance 90 

By  Promise  to  Accc[)t 90 

By  Conduct 107 

Incidents  of  the  Contract :  Admissions Ill 


CHAPTER   VI. 

Certifier's  Contract <,....  125 

Drawee's  Liability  before  Certification 125 

Liability  of  Drawee  to  Drawer  for  Refusal  to  Honor  Cheque  .     .     .  128 

Effect  of  Certification  on  Liability  of  Drawer 131 

Incidents  of  the  Contract :  Admissions 134 

Certification  of  Notes 134: 

Of  Acceptances , 137 

Certification  in  iMistake  as  to  Funds 141 

Payment  under  Mistake 141 


CHAPTER  VIL 

Drawer's  Contract 152 

Secondary  Liability  of  Drawer .  152 

Of  Bill  of  Exchange 152 

Of  Cheque 156 


CHAPTER  VIII 


Indorser's  Contract 

Necessity  of  Indorsement 
Form  of  Indorsement 
Kinds  of  Indorsement 

Special    .     .     . 

In  Blank      .     . 

Restrictive  .     . 
Who  must  Indorse  . 
I'arol  Evidence  to  Vary  Indorsement 
Incidents  of  the  Contract :  Warranties 

Admissions  .  .  .  »  .  «  o 
Indorser's  Conditional  Liability  .  . 
Presentment  and  Demand     ...» 

Place  of  o 

Time  of 

To  whom 


163 

163 

168 

172 

172 

174 

177 

181 

184 

189 

195 

205 

205 

. 

213 

o     .     o     „     „ 

227 

0     0     .     c     .      , 

.  245 

CONTENTS.            .  IX 

Page 

Notice  of  Dishonpr  :  Necessitj^  of 24S 

Form 251 

By  whom 263 

To  whom 267 

How 268 

When 269 

Where 277 

Due  Diligence 288 

Protest 288 

Excuse  of  Steps 292 

Excuse  of  Presentment 299 

Waiver  of  Steps 306 

Oral  Waiver 308 

Waiver  after  Maturity 312 

CHAPTER  IX. 

Accommodator'8  Contract 316 

Taking  with  Xotice 316 

Fraudulent  Diversion 319 

Purchase  after  Maturity 322 


CHAPTER  X. 

Assurer's  Contract 328 

Guaranty  and  Suretyship :  Nature 328 

Discharge  of  Surety 335 

Indorser  as  Surety  :  Dischiuge 338 

Accommodator  as  Surety 348 


CHAPTER  XL 

Holder's  Position 358 

Presumptive  Title  :   Right  to  Sue 358 

Absolute  Defences 360 

Bona  Jide  Holder 372 

Equities 404 

Facilitating  Alteration 444 

Presumption  :  Burden  of  Proof 457 


CHAPTER   Xn. 

Payment 461 

Payment  in  Due  Course  :  Surrender  of  Paper 461 

Payment  by  Secondary  Party > 4^66 


Index ^^^ 


CASES  EEPORTED. 


A. 

Paoe 

Adams  v.  King  54 

Aldous  V.  Corn  well  439 

Allen,  Burnliara  v.  16 

Allen,  Farnsworth  v.  243 

Annville  National  Bank  v.  Kettering  308 

Armstrong  v.  National  Bank  55 

Arnold  v.  Dresser  314 


B. 


Baldwin,  Munn  v.  268 

Ballou  V.  Talbot  64 

Bank  of  Alexandria  v.  Swann  269 

Bank  of  Commerce  v.  Union  Bank  121 
Bank    of    Georgia,     Bank    of    the 

United  States  v.  119 
Bank  of  Hamilton  v.  Imperial  Bank 

of  Canada  148 
Bank  of  tlie  United  States  v.  Bank 

of  Georgia  119 

Bank  of  tiie  United  States  v.  Davis  265 

Bank  of  the  United  States,  Mills  v.  251 

Bank  of  Utica  v.  Bender  283 

Baxendale  v.  Bennett  23 

Baxter  v.  Little  424 

Bay  V.  Coddington  372 

Bayle}'  v.  Taber  369 
Beal,  Dickins  v.                               152,  286 

Beauregard  v.  Knowlton  161 

Beecher,  Gates  v.  245 

Bender,  Bank  of  Utica  v.  283 

Bennett,  Baxendale  v.  23 

Berksiiire  Bank  v.  Jones  307 

Bethell,  Morris  v.  366 

Bigelow  V.  Colton  82 

Binney,  Taylor  v.  169 

Blanchard,  Grand  Bank  v.  224 

Boynton,  Freeman  v.  211 
Brown   v.   Butchers'   and    Drovers' 

Bank  168 

Brown  v.  Reed  442 

Brown,  West  v.  220 

Bryant,  Lysaght  v.  21 

Buck,  Cota  V.  45 

Bunker  Hill  National  Bank,  Wiley  v.  128 

Burke  v.  Dulaney  34 

Burnham  v.  Allen  16 

Burr,  Hale  i'.  300 

Burson  v.  Huntington  430 

Bush,  Townsend  v.  201 


Butchers'    and     Drovers'     Bank, 

Brown  v.  168 

Buttrick,  Wamesit  Bank  v.  287 


Carew  v.  Duckworth  156 

Carr  v.  National  Security  Bank  125 

Chapman  v.  Keane  263 

Charles,  Montelius  v.  227 

Cheever  v.  Pittsburgh,  etc.  R.  R.          398 

Chester  v.  Dorr  322 
Chicopee  Bank  v.  Philadelphia  Bank   222 

Clark,  Fearing  v.  28 

Clark  V.  Pease  407 

Clark  V.  Sickler  335 

Clarke,  Davis  v.  88 

Coddington,  Bay  v.  372 

Coit,  Paton  v.  457 

Colton,  Bigelow  v.  82 
Commercial   National  Bank,  War- 

ren-Scharf,  etc.  Co.  v.  197 

Coolidge  V.  Payson  90 

Corn  well,  Aldous  v.  439 

Cota  V.  Buck  45 

Crist  V.  Crist  181 

Cubitt,  Gill  V.  388 


D. 

Dale  V.  Gear  184 

Dana  v.  Sawyer  242 

Davis,  Bank  of  the  United  States  v.  265 

Davis  V.  Clarke  88 

Davis,  Fitchburg  Insurance  Co.  v.  261 
Dedhain  National  Bank  v.  Everett 

National  Bank  115 
Dennis,  Gilbert  v.  254,  306 
Dickins  v.  Beal  152,  286 
Dix,    Shoe   and    Leather    National 

Bank  v.  66 

Dorr,  Chester  v.  322 

Downer,  Sylvester  v.  71 

Downs,  Erwin  v.  196 

Dresser,  Arnold  v.  314 

Dresser  v.  Missouri,  etc.  Co.  393 

Duckworth,  Carew  v.  156 

Dulaney,  Burke  v.  34 

Dunavan  v.  Flynn  110 

Dunlop  V.  Silver  8 


xu 


CASES   REPORTED. 


E. 

Paob 

Karl  of  Lonileslmrough,  Scholfield  i'.  449 

Kbert,  Walker  v.  365 

Kllicott,  (iraiit  v.  318 

i:ilis  V.  Oliio  Insurance  Co.  I'^O 

Krwin  v.  Downs  196 

Estes  f.  Tower  83 
Everett    National    Rank,   Dedliam 

National  Bunk  r.  115 

Exchange  Bank  of  St.  Louis  v.  Rice  95 


F. 

Farmers'  Bank  of  Salem,  Lawson  i-.  271 
Farmers'   and  Mechanics'  Bank  i-. 

Kathbone  348 

Farnsworth  v.  Allen  243 

Fearing  v.  Clark  28 

Fi'jiring,  State  Bank  v.  195 

Fitclilturg  Insurance  Co.  v.  Davis  261 
Flour  Cit.v  National  Bank  v.  Traders' 

National  Bank  137 

Flynn,  Dunavan  v.  110 

Forster,  Wliistler  i\  163 

Foster  v.  Mackiinion  360 

Foster  V.  Parker  304 

Freeman  v.  Bovnton  211 


G. 


Gates  V.  Beecher  245 

Gay  V.  Rooke  40 

Gear.  Dale  i-.  184 

Gheen,  Worrall  v.  437 
Giddings  v.  Giddings'  Administrator      30 

Gill  V.  Cubitt  388 

Gilbert  v.  Dennis  254,  306 

(lilbert,  Sondheim  v.  414 

Goldman,  Littauer  v.  189 

Goodman  v.  Harvey  391 

Goodwin  r.  Robarts  1 

Goodwin,  Yates  v.  236,  250 

Grafton  National  Bank  i\  Wing  69 

Grand  Bank  v.  Blanchard  224 

Grant  v.  Ellicott  318 

Guild,  Wheeler  v.  461 


H. 

Hale  V.  Burr  300 

Harvey  v.  Goodman  391 

Hascall  v.  Whitmore  396 

Haskell  v.  Lambert  46 

Ilaynes,  Oxford  Bank  v.  331 
Henrietta  National   Bank  r.  State 

National  Bank  100 

Holmes  r.  Trumper  444 

Hough  V.  Loring  107 

Hungerford,  Seabury  v.  78 

Huntington,  Burson  v.  430 


Imperial  Bank  of  Canada  v.  Bank  of 

Hamilton 
Irving  Bank  v.  Wetlierald 


Paob 

148 
134 


J. 

Jackson,  Merritt  v.  233 

Jarvis  i'.  Wilson  111 

Jones,  Berkshire  Bank  v.  307 

Jones,  Lehman  v.  299 


K. 

Keane,  Chapman  v.  263 

Kendall,  Smith  v.  50 
Kettering,  Annville  National  Bank  v.    308 

King,  Adams  v.  54 

King,  Vinton  v.  '                 239 

Kinyon  ;'.  Stanton  159 

Knowlton,  Beauregard  v.  161 

Knox,  Shaw  v.  470 


L. 

Lake,  Musson  v.  205 

Lambert,  Haskell  v.  4ti 

Lancaster  National  Bank  v.  Taylor  165 
Lancaster  Savings  Institution,  Sho- 

enberger  v.  267 

Lawrence  County  Bank,  Moses  i\  328 

Lawson  v.  Farmers'  Bank  of  Salem  271 

Leavitt  v.  Putnam  172 

Lehman  i,-.  Jones  299 

Littauer  v.  Goldman  189 

Little,  Baxter  v.  424 

Loring,  Hough  v.  107 

Loring,  Slawson  v,  60 

Loring,  Sohier  v.  342 

Lyman,  Plummer  v.  105 

Lysaght  v.  Bryant  21 


M. 

Macdonald,  Walker  v.  174 
Mackinnon,  Foster  v.  360 
Madison  Square  Bank  v.  Pierce  466 
Magruder  v.  Union  Bank  of  George- 
town 248 
Marks,  Mattison  v.  53 
Massachusetts    National    Bank    v. 

Snow  427 
Mathews,  Sigerson  v.  312 
Mattison  v.  Marks  53 
McLemore  v.  Powell  339 
Mead,  Sutherland  v.  375 
Merchants'  National  Bank  v.  Na- 
tional Bank  of  the  Commonwealth  141 
Merritt  v.  Jackson  233 
Merritt,  Quinb3'  v.  43 
Mills  r.  Bank  of  the  United  States  251 


CASES   REPOETED. 


Xlll 


Page 

Minot  V.  Russ  1-^1 

Missouri,  etc.  Company,  Dresser  v.  393 

Montelius  v.  Charles  227 

Morris  v.  Betliell  366 

Moses  V.  Lawrence  County  Bank  328 

Munn  V.  Baldwia  268 

Musson  V.  Lake  205 


N. 


National  Bank,  Armstrong  v. 

National  Bank,  White  v. 

National  Bank  of  the  Common- 
wealth, Merchants'  National 
Bank  v. 

National  Security  Bank,  Carr  v. 

National  State  Bank  v.  Weil 

Neal,  Price  v. 

Newcomb  v.  Raynor 

Nicholls  V.  Webb 

Norton,  Windham  Bank  v. 


o. 

Ohio  Insurance  Co.,  Ellis  v. 
Oridge  v.  Sherborne 
Oxford  Bank  v.  Haynes 


Parker,  Foster  v. 

Payson,  Coolidge  v. 

Paton  V.  Coit 

Pease,  Clark  v. 

Pettee  v.  Prout 

Philadelphia  Bank,  Chicopee  Bank  v. 

Pierce,  Madison  Square  Bank  v. 

Pittsburgh,  etc.  R.  R.,  Cheever  v. 

Plummer  v.  Lyman 

Powell,  McLemore  v. 

Pratt,  Spear  v. 

Price  V.  Neal 

Prout,  Pettee  v. 

Putnam,  Leavitt  v. 

Putnam  v.  Sullivan 

Putnam  National  Bank  v.  Snow 


Quinby  v.  Merritt 


Q. 


R. 


Rathbone,  Farmers'  and  Mechanics' 

Bank  v. 
Raynor,  Newcomb  v. 
Ueed,  Brown  v. 

IJice,  Exchange  Bank  of  St.  Louis  v. 
Kider  v.  Taintor 


55 

177 


141 
125 
230 
113 
338 
288 
292 


120 

237 
331 


304 
90 
457 
407 
358 
222 
466 
398 
105 
339 
87 
113 
358 
172 
404 
103 


43 


348 
338 
442 
95 
167 


Page 
Robarts,  Goodwin  v.  1 

Rooke,  Gay  v.  40 

Ross,  Swope  V,  85 

Russ,  Minot  v.  131 


Sawyer,  Dana  v.  242 

Schmittler  v.  Simon  47 

Scholfield  V.  Earl  of  Londesborough  449 

Seabury  v.  Hungerford  78 

Shaefer,  Wood's  Sons  Co.  v.  38 

Shaw  V.  Knox  470 

Sherborne,  Oridge  v.  237 
Shoe  and  Leather  Nat.  Bank  v.  Dix  66 
Shoenberger  v.  Lancaster    Savings 

Institution  267 
Sickler,  Clark  v.  335 
Sigerson  v.  Mathews  312 
Silver,  Dunlop  v.  8 
Simon,  Schmittler  v.  47 
Slawson  v.  Loring  60 
Small  V.  Smith  319 
Smith  V.  Kendall  50 
Smith,  Small  v.  319 
Snow,  Massachusetts  Nat.  Bank  v.  427 
Snow,  Putnam  National  Bank  v.  103 
Snyder,  Taylor  v.  213 
Sohier  v.  Loring  342 
Sondheim  v.  Gilbert  414 
Spear  v.  Pratt  87 
Stanton,  Kinyon  i».  159 
State  Bank  v.  Fearing  195 
State  Capital  Bank  v.  Thompson  422 
State  National  Bank,  Henrietta  Na- 
tional Bank  v.  100 
Stetson,  Walker  v.  277 
Strobe,  Wheatley  v.  42 
Sullivan,  Putnam  v.  404 
Sutherland  v.  Mead  375 
Swann,  Bank  of  Alexandria  v.  269 
Swift  V.  Tyson  SiSl 
Swope  V.  Ross  85 
Sylvester  v.  Downer  71 


Taber,  Bayley  v.  369 

Taintor,  Rider  v.  167 

Talbot,  Ballou  v.  61 

Taylor  v.  Binney  l'>9 

Taylor,  Lancaster  National  Bank  v.  165 

Taylor  v.  Snyder  213 
Thatcher   v.  West  River  National 

Bank  316 

Thompson,  State  Capital  Bank  v.  422 

Tower,  Estes  v.  8i 

Townsend  v.  Buck  201 
Traders'  National  Bank,  Flour  City 

National  Bank  v.  137 

Trumper,  Holmes  v.  444 

Tyson,  Swift  v.  381 


XIV 


CASES   REPOIITED. 


u. 


Union  Bank.  Bank  of  Commerce  v. 
Union  Bank  of  Georgetown,  Magru- 

der  V. 
Union    Bank    of    Weymouth    and 

Braiutree  v.  Willis 


Vinton  v.  King 


V. 


w. 


Walker  i;.  Ebert 
Walker  r.  Macdonald 
Walker  v.  Stetson 
Wamesit  Bank  v.  Buttrick 
Warren-Scliarf,  etc.  Co.  v.  Commer- 
cial National  Bank 
Webb,  NichoUs  v. 
Weil,  National  State  Bank  v. 


Faok 
121 

248 

73 


239 


365 
174 

277 
287 

197 
288 
230 


Paob 
220 


West  V.  Brown 

West    River    National    Bank, 

Thatcher  r.  316 

Wetherald,  Irving  Bank  v.  134 

Wheatley  v.  Strobe  42 

Wheeler  v.  Guild  461 

White  V.  National  Bank  177 

Whistler  v.  Forster  163 

Wliitmore,  Hascall  v.  396 
Wiley  V.  Bunker  Hill  National  Bank  128 
Willis,  Union  Bank  of  Weymouth 

and  Braintree  v.  73 

Wilson,  Jarvis  v.  HI 

Windham  Bank  v.  Norton  292 

Wing,  Grafton  National  Bank  v.  69 

Wood's  Sons  Co.  v.  Shaefer  38 

WorraU  v.  Gh^een  437 


Yates  V.  Goodwill 


236,  250 


STATUTES   EEPORTED. 

Negotiable  Instruments  Law  [Rev.  Laws,  Mass.  ch.  73]  .    . 
Three  and  Four  Anne,  Ch.  IX 


Paob 

472 

16 


CASES 


our 


BILLS,  NOTES,  AND  CHEQUES. 


CHAPTER  I. 

LAW   MERCHANT. 


GOODWIN  V.  ROBAETS. 
Court  of  Exchequer  Chamber  of  England,  July,  1875.     L.  R.  10  Ex.  337. 
The  usages  of  merchants,  as  recognized  hy  the  courts,  constitute  the  law  merchant.^ 

Eeeor  by  the  defendants  on  a  judgment  of  the  Court  of  Exchequer 
in  favor  of  the  plaintiff. 

The  facts  are  stated  in  the  opinion. 

CocKBUEN,  C.  J,  The  question  for  our  decision  in  this  case  is 
whether  certain  scrip  issued  by  the  authority  of  the  Eussian  Gov- 
ernment, and  certain  other  scrip  issued  by  the  authority  of  the 
Austro-Hungarian  Government,  is  a  negotiable  security  for  money, 
so  that  the  transfer  of  it  by  a  person  not  being  the  true  owner  to 
a  bona  fide  holder,  for  value,  can  confer  a  good  title  on  the  latter. 

The  scrip  in  question  was  bought  by  the  plaintiff  through  one 
Clayton,  a  stockbroker,  and  was  allowed  to  remain  in  Clayton's 
hands,  who  unlawfully  pledged  it  with  the  defendants,  who  are 
bankers,  as  security  for  a  loan  of  money.  Clayton  having  become 
bankrupt  and  having  absconded,  the  defendants  sold  the  scrip  at 
the  market  price  of  the  day,  and  the  plaintiff  brings  his  action  to 
recover  the  amount  realized  on  such  sale. 

The  scrip  in  question  was  in  the  following  form: 

"1873     C.        1873.        Impeeial  Goveenment  of  Eussia. 

Issue  of  £15,000,000  sterling  nominal  capital  in  5  per  cent  con- 
solidated bonds  of  1873.  Negotiated  by  Messrs.  N.  M.  Eothschild  & 
Sons,  London,  and  Messrs.  de  Eothschild  Brothers,  Paris.    Bearing 

1  N.  I.  L.  §  212. 
1 


2  LAW  MERCHANT. 

interest  half-yearly,  payable  in  London  from  1st  of  December,  1873. 
Scrip  for  one  hundred  pounds  stock,  No.  — . 

Received  the  sum  of  twenty  pounds,  being  the  first  instalment 
of  20  per  cent  upon  one  hundred  pounds  stock,  and  on  payment 
of  the  remaining  instalments  at  the  period  specified,  the  bearer 
will  be  entitled  to  receive  a  definitive  bond  or  bonds  for  one  hun- 
dred pounds  after  receipt  thereof  from  the  Imperial  Government. 


Then  follow  four  other  receipts  for  £20  each,  making  up  the 
£100,  for  which  the  bond  is  afterwards  to  be  given. 

The  scrip  issued  by  the  authority  of  the  Austro-Hungarian  Gov- 
ernment was  in  a  precisely  similar  form. 

The  scrip  in  question  was  issued  by  Messrs.  de  Rothschild  as  the 
agents  of  the  Russian  and  Austro-Hungarian  governments,  they 
being  employed  by  these  governments  to  negotiate  and  raise  a  loan 
for  them  respectively  on  government  bonds,  bearing  interest,  to  be 
afterwards  issued  in  exchange  for  the  scrip  when  all  the  instalments 
of  the  sum  for  which  the  scrip  was  issued  should  have  been  paid 
up.  No  question  is  raised  as  to  the  fact  of  Messrs.  de  Rothschild 
having  acted  in  the  matter  as  agents  of  the  two  governments,  or 
of  the  scrip  having  been  issued  by  the  authority  of  the  latter. 

The  ninth  paragraph  of  the  special  case  contains  the  following 
statement,  upon  which,  as  it  appears  to  us,  the  decision  of  the  case 
turns: 

"  The  scrip  of  loans  to  foreign  governments,  entitling  the  bearer 
thereof  to  bonds  for  the  same  amount  when  issued  by  the  govern- 
ment, has  been  well  known  to  and  largely  dealt  in  by  bankers,  money 
dealers,  and  the  members  of  the  English  and  Foreign  Stock  Ex- 
changes, and  through  them  by  the  public,  for  over  fifty  years.  It  is 
and  has  been  the  usage  of  such  bankers,  money  dealers,  and  stock 
exchanges,  during  all  that  time,  to  buy  and  sell  such  scrip  and 
to  advance  loans  of  money  upon  the  security  of  it  before  the  bonds 
were  issued,  and  to  pass  the  scrip  upon  such  dealing  by  mere 
delivery  as  a  negotiable  instrument  transferable  by  delivery,  and 
this  usage  has  always  been  recognized  by  the  foreign  governments 
or  their  agents  delivering  the  bonds  when  issued  to  the  bearers  of 
the  scrip." 

[The  contention  of  the  defendants  was  that  the  finding  of  the 
general  usage  of  bankers  with  respect  to  these  instruments  was 
sufficient  to  determine  their  character  as  negotiable  paper.  Gorgier 
V.  Mieville,  3  B.  &  C.  45,  and  Attorney-General  v.  Bouwens,  4  M.  & 
W.  171,  were  cited  by  them. 

Mr.  Benjamin,  on  behalf  of  the  plaintiff,  distinguished  the  present 


GOODWIN   V.    ROBAIITS.  3 

case  from  Gorgier  v.  Mieville,  3  B.  &  C.  45.]  He  insisted,  first,  that 
although  it  must  be  admitted  that,  if  a  bond  had  been  given  in 
lieu  of  this  scrip,  the  bond  would  have  been  a  negotiable  instru- 
ment, as  the  case  would  then  have  come  within  Gorgier  v.  Mieville, 
3  B.  &  C.  45,  here  there  was  no  engagement  on  the  part  of  the  for- 
eign government.  The  only  party  signing  the  scrip,  or  who  could 
be  held  bound  by  it,  were  the  Messrs.  de  Rothschild;  and  the  per- 
sons advancing  their  money,  and  taking  the  scrip,  could  look  only 
to  them.  Secondly,  that  even  assuming  that  the  issuing  of  the 
scrip  was  to  be  taken  to  be  the  act  of  the  foreign  government,  yet 
that  as  it  had  been  issued  in  London,  and  the  parties  taking  it 
had  advanced  their  money  in  this  country,  the  contract  must  be 
taken  to  have  been  made  here,  and  must  be  subject  to  the  law  of 
England.  That  when  a  foreign  sovereign  negotiated  a  loan  in  this 
country,  through  his  agent,  it  was  in  effect  the  same  thing  as 
though  such  sovereign  had  himself  come  to  this  country  and  en- 
tered into  the  contract  in  person.  That,  consequently,  in  either 
view,  the  contract  arising  on  the  scrip  must  be  taken  to  have  been 
made  here,  and  must  be  dealt  with  according  to  English  law.  That 
this  being  so,  the  case  of  Crouch  v.  The  Credit  Foncier  of  Eng- 
land, Law  Eep.  8  Q.  B.  374,  was  an  authority  which  established 
that  it  was  not  competent  to  any  one,  by  the  law  of  England,  to 
give  to  a  security,  not  negotiable  by  the  law  merchant,  the  char- 
acter of  negotiability,  by  making  it  payable  to  bearer,  even  though 
such  security  were  a  security  for  money.  That,  a  fortiori,  this  scrip, 
not  being  a  promise  to  pay  money,  but  only  to  give  a  bond  when  all 
the  instalments  should  have  been  paid  up,  could  not  have  the  char- 
acter of  negotiability  given  to  it  by  being  made  payable  to  bearer. 
That  choses  in  action  not  being  assignable  by  the  general  common 
law,  it  was  only  by  the  law  merchant,  which  was  recognized  by  the 
common  law  and  adopted  by  it,  that  a  particular  class  of  securities 
for  money  could  be  made  negotiable,  either  by  indorsement,  or  by 
being  made  payable  to  bearer;  and  that  this  class  of  securities  was 
confined  to  bills  of  exchange,  promissory  notes,  and  drafts  payable 
to  bearer.  That  this  scrip  did  not  coincide  with  either  of  the 
securities  for  money  to  which  by  the  law  merchant,  the  quality  of 
being  so  rendered  negotiable  had  been  conceded;  the  more  so  as 
in  fact  it  was  not  a  security  for  money  at  all,  but  only  an  agreement 
to  give  such  a  security  in  the  shape  of  a  bond.  That  the  bonds  of 
foreign  governments  had  been  held  to  be  negotiable  by  the  courts 
of  this  country,  not  because  they  were  negotiable  by  the  law  of  the 
country  in  which  they  were  made,  but  because  they  were  in  substance 
and  effect  promissory  notes. 

[Messrs.  de  Rothschild  are  not  bound  on  the  scrip.  " '  If  an 
agent,  on  behalf  of  government,  makes  a  contract  and  describes 
himself  as  such,  he  is  not  personally  bound,  even  though  the  terms 


4  LAW   MERCHANT. 

.<of  the  contract  be  such  as  might,  in  a  case  of  a  private  nature,  in- 
volve him  in  personal  liability.' "    2  Kent's  Commentaries,  7th  ed., 

;.p.  810.] 

We  think  it  unnecessary'  to  enter  upon  the  question  whether  the 

I  contract  thus  entered  into  is  to  be  considered  as  a  Kussian  or  an 
English  contract,  as  we  agree  in  thinking  that  its  negotiable  char- 
acter, if  it  exists  at  all,  must  depend  not  on  what  might  be  its 
negotiability  by  the  foreign  law,  but  on  how  far  the  universal  usage 
of  tlie  monetary  world  has  given  it  that  character  here.  "The 
question,"  says  Tindal,  C.  J.,  in  Lang  v.  Smyth,  7  Bing.  284,  at 
page  293,  "  is  not  so  much  what  is  the  usage  in  the  country  whence 
the  instrument  comes,  as  in  the  country  where  it  passed."    The  sub- 

,  stance  of  Mr.  Benjamin's  argument  is,  that,  because  the  scrip  does 
not  correspond  with  any  of  the  forms  of  the  securities  for  money 

•  which  have  been  hitherto  held  to  be  negotiable  by  the  law  merchant, 
and  does  not  contain  a  direct  promise  to  pay  money,  but  only  a 
promise  to  give  security  for  money,  it  is  not  a  security  to  which,  by 
the  law  merchant,  the  character  of  negotiability  can  attach. 

Having  given  tlie 'fullest  consideration  to  this  argument,  we  are  of 
opinion  that  it  cannot  prevail.  It  is  founded  on  the  view  that  the 
law  merchant  thus  referred  to  is  fixed  and  stereotyped,  and  incapable 
of  being  expand^  and  enlarged  so  as  to  meet  the  wants  and  require- 
ments of  trade  in  the  varying  circumstances  of  commerce.  It  is 
true  that  the' law  merchant  is  sometimes  spoken  of  as  a  fixed  body 
of  law,  forming  part  of  the  common  law,  and  as  it  were  coeval  with 
it.  But  as  a  matter  of  legal  histor}%  tliis  view  is  altogether  incorrect. 
The  law  merchant  thus  spoken  of  with  reference  to  bills  of  exchange 
and  other  negotiable  securities,  though  forming  part  of  the  general 
body  of  the  lex  mercatona,  is  of  comparatively  recent  origin.  It  is 
neither  more  nor  less  than  the  usages  of  merchants  and  traders  in 
the  different  departments  of  trade,  ratified  by  the  decisions  of  courts 
of  law,  which,  upon  such  usages  being  proved  before  them,  have 
adopted  them  as  settled  law  with  a  view  to  the  interests  of  trade 
and  the  public  convenience,  the  court  proceeding  herein  on  the  well- 
knoAvn  principle  of  law  that,  with  reference  to  transactions  in  the 
different  departments  of  trade,  courts  of  law,  in  giving  effect  to  the 
contracts  and  dealings  of  the  parties,  will  assume  that  the  latter 
have  dealt  with  one  another  on  the  footing  of  any  custom  or  usage 
prevailing  generally  in  the  particular  department.  By  this  process, 
what  before  was  usage  only,  unsanctioned  by  legal  decision,  has  be- 
come engrafted  upon,  or  incorporated  into,  the  common  law,  and 
may  thus  be  said  to  form  part  of  it.  "When  a  general  usage  has 
been  judicially  ascertained  and  established,"  sa^^s  Lord  Campbell,  in 
Brandao  t'.  Bamett,  12  CI.  &  F.  at  p.  805,  "it  becomes  a  part  of 
the  law  merchant,  which  courts  of  justice  are  bound  to  know  and 
recomize." 


GOODWIN   V.  EOBARTS.  5 

Bills  of  exchange  are  known  to  be  of  comparatively  modern  origin, 
having  been  first  brought  into  use,  so  far  as  is  at  present  known,  by 
the  Florentines  in  the  twelfth,  and  by  the  Venetians  about  the  thir- 
teenth, century.  The  use  of  them  gradually  foiind  its  way  into 
France,  and,  still  later  and  but  slowly,  into  England. 

According  to  Professor  Story,  who  herein  is,  no  doubt,  perfectly 
right,  "  the  introduction  and  use  of  bills  of  exchange  in  England," 
as  indeed  it  was  everywhere  else,  "  seems  to  have  been  founded  on  the 
mere  practice  of  merchants,  and  gradually  to  have  acquired  the  force 
of  a  custom."  With  the  development  of  English  commerce  the  use 
of  these  most  convenient  instruments  of  commercial  traffic  would  of 
course  increase,  yet,  according  to  Mr.  Chitty,  the  earliest  case  on  the 
subject  to  be  found  in  the  English  books  is  that  of  Martin  v.  Boure, 
Cro.  Jac.  6,  in  the  first  James  I.  Up  to  this  time  the  practice  of 
making  these  bills  negotiable  by  indorsement  had  been  unknown,  and 
the  earlier  bills  are  found  to  be  made  payable  to  a  man  and  his  as- 
signs, though  in  some  instances  to  bearer.  But  about  this  period, 
that  is  to  say,  at  the  close  of  the  sixteenth  or  the  commencement  of 
the  seventeenth  century,  the  practice  of  making  bills  payable  to  order, 
and  transferring  them  by  indorsement,  took  its  rise. 

From  its  obvious  convenience  this  practice  speedily  came  into  gen- 
eral use,  and,  as  part  of  the  general  custom  of  merchants,  received 
the  sanction  of  our  courts.  At  first  the  use  of  bills  of  exchange  seems 
to  have  been  confined  to  foreign  bills  between  English  and  foreign 
merchants.  It  was  afterwards  extended  to  domestic  bills  between 
traders,  and  finally  to  bills  of  all  persons,  whether  traders  or  not: 
see  Chitty  on  Bills,  8th  ed.,  p.  13. 

[In  the  meantime,  promissory  notes  had  come  into  use,  and  for 
some  time  the  courts  of  law  acted  upon  the  usages  with  reference  to 
them,  as  well  as  with  reference  to  bills  of  exchange.  But  Holt,  C.  J., 
set  himself  against  the  custom.  The  inconvenience  to  trade  arising 
therefrom  led  to  the  passage  of  the  statute  of  3  &  4  Anne,  c.  9, 
whereby  promissory  notes  were  put  on  the  same  footing  as  bills  of 
exchange.  Goldsmith's  notes  and  cheques  were  also  recognized  as 
negotiable  instruments,  following  th€  custom  of  merchants.] 

It  thus  appears  that  all  these  instruments  which  are  said  to  have 
derived  their  negotiability  from  the  law  merchant  had  their  origin, 
and  that  at  no  very  remote  period,  in  mercantile  usage,  and  were 
adopted  into  the  law  by  our  courts  as  being  in  conformity  with  the 
usages  of  trade;  of  which,  if  it  were  needed,  a  further  confirmation 
might  be  found  in  the  fact  that,  according  to  the  old  form  of  declar- 
ing on  bills  of  exchange,  the  declaration  always  was  founded  on  the 
custom  of  merchants. 


6  LAW   MERCHANT. 

Usago,  adopted  by  the  courts,  having  been  thus  the  origin  of  the 
whole  of  the  so-called  law  merchant  as  to  negotiable  securities,  what 
is  there  to  prevent  our  acting  upon  the  principle  acted  upon  by  our 
predecessors,  and  followed  in  the  precedents  they  have  left  to  us? 
Why  is  it  to  be  said  that  a  new  usage  which  has  sprung  up  under 
altered  circumstances  is  to  be  less  admissible  than  the  usages  of  past 
times?  Why  is  the  door  to  be  now  shut  to  the  admission  and  adop- 
tion of  usage  in  a  matter  altogether  of  cognate  character,  as  though 
the  law  had  been  finally  stereotyped  and  settled  by  some  positive  and 
peremptory  enactment?  It  is  true  that  this  scrip  purports,  on  the 
face  of  it,  to  be  a  security  not  for  money,  but  for  the  delivery  of  a 
bond;  nevertheless  we  think  that  substantially  and  in  effect  it  is  a 
security  for  money,  which,  till  the  bond  shall  be  delivered,  stands  in 
the  place  of  that  document,  which,  when  delivered,  will  be  beyond 
doubt  the  representative  of  the  sum  it  is  intended  to  secure.  Sup- 
pose the  possible  case  that  the  borrowing  government,  after  receiving 
one  or  two  instalments,  were  to  determine  to  proceed  no  further  with 
its  loan,  and  to  pay  back  to  the  lenders  the  amount  they  had  already 
advanced;  the  scrip  with  its  receipts  would  be  the  security  to  the 
holders  for  the  amount.  The  usage  of  the  money  market  has  solved 
the  question  whether  scrip  should  be  considered  security  for,  and  the 
representative  of,  money,  by  treating  it  as  such. 

The  universality  of  a  usage  voluntarily  adopted  between  buyers 
and  sellers  is  conclusive  proof  of  its  being  in  accordance  with  public 
convenience. 

[In  Crouch  v.  The  Credit  Foncier  of  England,  Law  Eep.  8  Q.  B. 
374,  the  defendants  had  issued  bonds  payable  to  bearer,  "subject  to 
the  conditions  indorsed  on  this  debenture."  It  was  held,  that,  even 
assuming  that  a  promise  to  pay  under  seal  could  be  considered  a 
promissory  note,  here  the  conditions  annexed  to  the  promise  took 
away  that  character  from  the  instrument.  But  it  was  said  that  the 
custom  as  to  these  instruments  was  of  very  recent  origin,  and  hence 
could  not  give  the  character  of  negotiability  to  them,  because  the 
custom,  being  recent,  formed  no  part  of  the  ancient  law  mercliant.] 

For  the  reasons  we  have  already  given  we  cannot  concur  in  think- 
ing the  latter  ground  conclusive.  While  we  quite  agree  that  the 
greater  or  less  time  during  which  a  custom  has  existed  may  be 
material  in  determining  how  far  it  has  generally  prevailed,  we  can- 
not think  that,  if  a  usage  is  once  shown  to  be  universal,  it  is  the  less 
entitled  to  prevail  because  it  may  not  have  formed  part  of  the  law 
merchant  as  previously  recognized  and  adopted  by  the  courts.  It  is 
obvious  that  such  reasoning  would  have  been  fatal  to  the  negotiability 
of  foreign  bonds,  which  are  of  comparatively  modern  origin,  and  yet, 
according  to  Gorgier  v.  Mieville,  3  B.  &  C.  45,  are  to  be  treated  as 
negotiable.    We  think  the  judgment  in  Crouch  v.  The  Credit  Foncier, 


GOODWIN   V.  EOBARTS.  7 

Law  Eep.  8  Q.  B.  374,  may  well  be  supported  on  the  ground  that  in 
that  case  there  was  substantially  no  proof  whatever  of  general  usage. 
We  cannot  concur  in  thinking  that  if  proof  of  general  usage  had 
been  established,  it  would  have  been  a  sufficient  ground  for  refusing 
to  give  effect  to  it  that  it  did  not  form  part  of  what  is  called  "  the 
ancient  law  merchant." 

We  must  by  no  means  be  understood  as  saying  that  mercantile 
usage,  however  extensive,  should  be  allowed  to  prevail  if  contrary 
to  positive  law,  including  in  the  latter  such  usages  as,  having  been 
made  the  subject  of  legal  decision,  and  having  been  sanctioned  and 
adopted  by  the  courts,  have  become,  by  such  adoption,  part  of  the 
common  law.  To  give  effect  to  a  usage  which  involves  a  defiance  or 
disregard  of  the  law  would  be  obviously  contrary  to  a  fundamental 
principle.  And  we  quite  agree  that  this  would  apply  quite  as  strongly 
to  an  attempt  to  set  up  a  new  usage  against  one  which  has  become 
settled  and  adopted  by  the  common  law  as  to  one  in  conflict  with  the 
more  ancient  rules  of  the  common  law  itself.  Thus,  it  having  been 
decided  in  the  two  cases  of  More  v.  Manning,  1  Comyns'  Eep.  311, 
and  Acheson  v.  Fountain,  1  Str.  557,  that  when  a  bill  of  exchange 
was  indorsed  to  A  B,  without  the  words  "  or  order,"  the  bill  was 
nevertheless  assignable  by  A  B,  by  further  indorsement.  Lord 
Mansfield  and  the  Court  of  King's  Bench,  in  the  case  of  Edie 
V.  The  East  India  Company,  2  Burr.  1216,  held  that  evidence  of 
a  contrary  usage  was  inadmissible.  [See  also  Grant  v.  Vaughn, 
3  Burr.  1516.] 

If  we  could  see  our  way  to  the  conclusion  that,  in  holding  the 
scrip  in  question  to  pass  by  delivery,  and  to  be  available  to  bearer, 
we  were  giving  effect  to  a  usage  incompatible  either  with  the  common 
law  or  with  the  law  merchant  as  incorporated  into  and  embodied  in 
it,  our  decision  would  be  a  very  different  one  from  that  which  we 
are  about  to  pronounce.  But  so  far  from  this  being  the  case,  we 
are,  on  the  contrary,  in  our  opinion,  only  acting  on  an  established 
principle  of  that  law  in  giving  legal  effect  to  a  usage,  now  become 
universal,  to  treat  this  form  of  security,  being  on  the  face  of  it 
expressly  made  transferable  to  bearer,  as  the  representative  of  money, 
and  as  such,  being  made  to  bearer,  as  assignable  by  delivery.  This 
being  the  conclusion  at  which  we  have  arrived,  the  judgment  of  the 
Court  of  Exchequer  will  be  affirmed. 

Judgment  affirmed.    ^ 


8  LAW  MERCHANT. 

DUNLOP  V.  SILVER.^ 

Circuit  Court,  District  of  Columbia,  July,  1801.     1  Cranch,  367. 

The  general  presumption  of  liability  waa  transformed  by  the  commoQ-law  judges 
into  a  particular  presumption  of  consideration. 

Action  by  the  indorsee  of  a  negotiable  promissory  note  against  a 
remote  indorser. 

James  Cavan  made  a  promissory  note  payable  to  Silver  et  al.  or 
order,  sixty  days  after  date,  in  the  sum  of  $600,  for  value  received, 
negotiable  at  the  Bank  of  Alexandria.  Silver  et  al.  indorsed  the  note 
to  Downing  &  Dowell,  who  indorsed  it,  "  Pay  the  contents  to  John 
Dunlop  or  order."  Dunlop  had  obtained  judgment  and  execution 
against  the  maker,  who  took  the  oath  of  an  insolvent  debtor.  He 
now  sued  Silver  as  indorser. 

Two  Counts.  1.  A  special  count  stating  the  making  and  indors- 
ing, the  suit,  judgment,  execution,  and  insolvency  of  the  maker,  by 
reason  whereof  the  defendant  became  liable,  etc.  2.  Indebitatus 
assumpsit  for  money  had  and  received.  Plea,  no7i  assumpsit,  and 
verdict  for  the  plaintiff  subject  to  the  opinion  of  the  court  whether 
the  holder  can  maintain  an  action  against  the  remote  indorser  of  a 
promissory  note,  under  Virginia  law.  The  statute  of  3  &  4  Anne, 
c.  9,  was  not  in  force  in  that  State;  but  an  Act  of  1786,  c.  29,  existed, 
by  which  "  an  action  of  debt  may  be  maintained  upon  a  note  or 
writing  by  which  the  person  signing  the  same  shall  promise  or  oblige 
himself  to  pay  a  sum  of  money,  or  quantity  of  tobacco,  to  another,'* 
and  that  "  assignments  of  bonds,  bills,  and  promissory  notes,  and 
other  writings  obligatory,  for  payment  of  money  or  tobacco,  shall  be 
valid ;  and  an  assignee  of  any  such  may  thereupon  maintain  an  action 
of  debt  in  his  own  name,  but  shall  allow  all  just  discounts,  not  only 
against  himself,  but  against  the  assignor,  before  notice  of  the  assign- 
ment was  given  to  the  defendant." 

[The  decision  by  Kilty,  C.  J.,  and  Cranch,  Assist.  J.,  was  in 
favor  of  the  plaintiff,  an  opinion  —  by  which  judge  is  not  stated  — 
having  been  delivered  which  occupies  nearly  a  hundred  pages  in 
Cranch.  No  question  of  the  kind  is  ever  raised  nowadays,  and  there 
is  no  occasion  to  follow,  in  detail,  the  elaborate  examination  of  the 
subject  made  by  the  court.    It  is  enough,  so  far  as  that  is  concerned, 

1  Tlie  issue  was  whether  a  remote  indorser  of  a  negotiable  promissory  note,  in 
Virp;iiiia  law,  was  liable  to  the  liolder,  the  court  holding  that  such  indorser  was  liable. 
At  the  Fel)ruary  term,  1803,  of  the  Supreme  Court  of  the  United  States,  it  was  lield, 
contrary  to  the  decision  in  this  case,  on  error  to  tlie  same  court,  that  by  the  law  of 
Virginia  an  indorsee  of  a  promissory  note  could  not  maintain  an  action  against  a  re- 
mote indorser  for  want  of  privity.  Mandeville  v.  Kiddle,  1  Cranch,  290.  The  case 
supra,  tlius  overruled,  is  reported  in  Cranch  as  an  Appendix  to  Mandeville  v.  IJiddle. 
Its  value  consists  entirely  in  its  exhaustive  historicnl  review  of  the  authorities,  going 
back  as  it  does  to  the  very  beginning  of  actions  in  the  Superior  Courts. 


DUNLOP   V.  SILVER.  9 

to  remind  the  student  that  the  case  is  an  invaluable  storehouse  of  the 
law  of  bills  of  exchange  and  promissory  notes,  from  its  first  emerg- 
ence in  the  law  reports  down  to  the  time  of  the  decision.  Nowhere 
else  can  there  be  found  such  an  exhaustive  review  of  the  authorities. 
It  must  suffice  here  to  make  some  important  extracts  from  the 
opinion,  with  a  view  to  showing  how  the  custom  of  merchants  touch- 
ing these  instruments  came  to  be  grafted  upon  the  law  of  England.] 

A  distinction  seems  to  have  been  made  very  early  between  the  con- 
tracts of  merchants  (especially  of  foreign  merchants)  and  those  of 
other  people.  Nearly  six  hundred  years  ago  we  find  their  "  old  and 
rightful  customs  "  protected  by  the  great  charter  of  English  liberties. 
Magna  Charta,  c.  30.  .  .  .  In  the  13  Edw.  IV.  9,  10,  cited  by  Molloy, 
book  3,  c.  7,  §  15,  it  is  said  that  "  a  merchant  stranger  made  suit 
before  the  King's  Privy  Council,  for  certain  bales  of  silk  feloniously 
taken  from  him,  wherein  it  was  moved  that  this  matter  should  be 
determined  at  common  law ;  but  the  Lord  Chancellor  answered,  that 
this  suit  is  brought  by  a  merchant  who  is  not  bound  to  sue  according 
to  the  law  of  the  land,  nor  to  tarry  the  trial  of  twelve  men."  [The 
argument  is  that  the  custom  of  merchants  had  come  to  be  treated, 
before  the  statute  of  Anne,  as  part  of  the  common  law.] 

Forms  of  pleading  often  tend  to  elucidate  the  law.  By  observing 
the  forms  of  declarations  which  have  from  time  to  time  been  adopted 
in  actions  upon  bills  of  exchange,  we  may  perhaps  discover  the  steps 
by  which  the  courts  allowed  actions  to  be  brought  upon  them  as  sub- 
stantive causes  of  action,  without  alleging  any  consideration  for  the 
making  or  accepting  them.  The  first  forms  which  were  used  take 
no  notice  of  the  custom  of  merchants  as  creating  a  liability  distinct 
from  that  which  arises  at  common  law,  but  by  making  use  of  several 
fictions  bring  the  case  within  the  general  principles  of  actions  of 
assumpsit.  The  oldest  form  which  is  recollected  is  to  be  found  in 
Rastell's  Entries,^  fol.  10  (a),  under  the  head  "Action  on  the  case 
upon  promise  to  pay  money."  .  .  .  This  declaration  sets  forth  that  A 
complains  of  B,  etc.,  for  that  whereas  the  said  A,  by  a  certain  I  C, 
his  sufficient  attorney,  factor,  and  deputy  in  this  behalf,  on  such  a 
day  and  year,  at  L,  at  the  special  instance  and  request  of  the  said  B, 
had  delivered  to  the  said  B,  by  the  hands  of  the  said  I  C,  to  the 
proper  use  of  the  said  B,  £110  8s.  4 J.,  lawful  money  of  England; 
foi-  which  said  £110  8s.  4d.,  so  to  the  said  B  delivered,  he,  the  said  B, 
then  and  there  to  the  said  I  C  (then  being  the  sufficient  attorney, 
factor,  and  deputy  of  the  said  A  in  this  behalf)  faithfully  promised 
and  undertook  that  a  certain  John  of  G  well  and  faithfully  would 
content  and  pay  to  Eeginald  S  (on  such  a  day  and  .year,  and  always 

1  Published  at  first  in  the  year  1564,  but  later  editions  contain  the  case  below,  of 
37  Eliz. 


10  LAW   MERCHANT. 

afterwards,  hitherto  the  sufBcicnt  deputy,  factor,  and  attorney  of  the 
said  A  in  tliis  behalf)  443^  ducats,  on  a  certain  day  in  the  declaration 
mentioned.  And  if  the  aforesaid  John  of  G  should  not  pay  and  con- 
tent the  said  Reginald  S  the  said  443§  ducats,  at  the  time  above 
limited,  that  then  the  said  B  would  well  and  faithfully  pay  and 
content  the  said  A  £110  86\  4(/.,  lawful  money  of  England,  with  all 
damages  and  interest  thereof,  whenever  he  should  be  thereunto  by 
the  said  A  requested.  It  then  avers  that  the  said  443 1  ducats  were 
of  the  value  of  £110  8s.  4(1.,  lawful  money  of  England,  that  John  of 
G  had  not  paid  the  ducats  to  Eeginald  S,  and  that  if  he  had  paid 
them  "to  the  said  R[eginald],  I,  B  and  their  associates,  or  to  either 
of  them,  then  the  said  443 1  ducats  would  have  come  to  the  benefit 
and  profit  of  the  said  A.  Yet  the  said  B,  contriving  the  aforesaid 
A  of  the  said  £110  8s.  4(/.,  and  of  the  damages  and  interest  thereof, 
falsely  and  subtly  to  deceive  and  defraud,  the  same  or  any  part 
thereof,  to  the  said  A  although  often  thereunto  required,  according 
to  his  promise  and  undertaking  aforesaid,  had  not  paid,  or  in  any 
manner  contented,  whereby  the  said  A,  not  only  the  profit  and  gain 
which  he,  the  said  A,  with  the  said  £110  8s.  4c?,  in  lawfully  bargain- 
ing and  carrying  on  commerce  might  have  acquired,  hath  lost;  but 
also  the  said  A,  in  his  credit  towards  divers  subjects  of  our  lord  the 
king  (especially  towards  R  H  and  I  A,  to  whom  the  said  A  was  in- 
debted in  the  sum  of  £110  8s.  4:d.,  and  to  whom  the  said  A  had  prom- 
ised to  pay  the  same  £110  8s.  4:d.  at  a  day  now  past,  in  the  hope  of  a 
faithful  performance  of  the  promise  and  undertaking  aforesaid),  is 
much  injured,  to  his  damage,"  etc.  This  declaration  seems  to  have 
been  by  the  indorsee  of  a  bill  of  exchange  against  the  drawer.  .  .  . 
A  is  supposed  to  make  I  C  his  attorney  for  the  purpose  of  paying 
£110  to  B  and  to  receive  a  promise  from  B  that  John  of  G  should 
pay  to  Reginald  S  443|  ducats.  And  A  is  also  supposed  to  have 
made  Reginald  S  his  attorney  for  the  purpose  of  receiving  the 
ducats.  .  .  ,  [These  and  the  like  allegations  are  considered  to  be 
fictions.^] 

In  the  declaration  of  payee  v.  acceptor,  fol.  388  (a)  [of  Rastell], 
the  foreign  merchant  who  paid  the  1400  crowns  to  the  drawer  of  the 
bill  in  France,  to  be  remitted  to  the  plaintiff  (the  payee)  in  England, 
is  stated  to  be  the  plaintiff's  factor;  and  the  drawer  of  the  bill  is 
stated  to  be  the  factor  of  the  defendant  (the  acceptor)  ;  so  that  the 
plaintiff,  by  his  factor,  is  supposed  to  pay  to  the  defendant,  through 
the  medium  of  the  defendant's  factor,  the  1400  crowns,  in  considera- 
tion of  which  it  is  averred  that  the  defendant  in  England  promised 
the  plaintiff  to  pay  him  £414  8s.  4:d.,  lawful  money  of  England. 

This  declaration  sets  forth  that  whereas  the  plaintiff  on  the  tenth 
of  June,  37  Eliz.,  at  Rochelle  in  France,  in  parts  beyond  seas,  by  the 
1  See  Bigelow,  Bills  and  Notes,  3. 


DUNLOP   V.   SILVER.  11 

hands  of  a  certain  T  S,  then  the  factor  of  the  plaintiff,  at  the  request 
of  a  certain  E  W,  then  the  factor  of  the  defendant,  delivered  and  paid 
to  the  said  E  W,  then  the  factor  of  the  defendant,  to  the  use  of  the 
defendant,  as  much  ready  money  as  amounted  to  1400  French  crowns 
of  the  money  of  France,  in  parts  beyond  sea,  at  the  rate  of  5s.  lid., 
lawful  money  of  England,  for  each  French  crown.  And  thereupon 
the  said  E  W,  at  Eochelle  aforesaid,  then  delivered  to  the  said  T  S 
three  bills  of  exchange,  viz.,  first,  second,  and  third;  in  the  first  of 
which  bills  of  exchange  the  said  E  W  requested  the  defendant  to  pay 
to  the  plaintiff  at  L  £414  8s,  4(i.,  lawful  money  of  England,  at  the 
end  of  thirty  days  next  after  sight  of  that  bill  of  exchange  (the  second 
and  third  bills  of  exchange  to  the  plaintiff  not  paid).  It  then  sets 
forth  the  tenor  of  the  second  and  third  bills,  and  then  avers  that  the 
defendant,  on  the  day  and  year  first  aforesaid,  at  the  city  of  E  .  .  . 
in  consideration  thereof,  undertook,  and  to  the  plaintiff  then  and 
there  faithfully  promised,  that  he,  the  defendant,  will  and  faithfully 
would  pay  to  the  plaintiff,  to  the  plaintiff's  use,  at  the  city  of  E  .  .  . 
by  way  of  exchange,  according  to  the  usage  of  merchants,  the  afore- 
said £414  8s.  4:d.,  lawful  money  of  England,  at  the  end  of  thirty  da3^s 
next  after  sight  of  any  of  the  bills  of  exchange  aforesaid;  and  the 
plaintiff  in  fact  saith  that  afterward,  viz.,  on  the  1st  of  September  in 
the  year  aforesaid,  at,  etc.,  the  first  of  the  said  bills  came  to  the  sight 
of,  and  was  then  and  there  shown  to,  the  defendant,  yet  the  defendant 
not  regarding,  etc.,  but  contriving,  etc.,  did  not  pay  the  said  £414  8s. 
4:d.,  etc.,  at  the  end  of  the  thirty  days,^  etc.,  whereby  the  defendant 
lost  the  benefit  of  trading  with  the  said  £414  8s.  4^.,  etc.,  to  his  dam- 
age £600. 

In  this  declaration  it  will  be  perceived  that  the  custom  of  mer- 
chants is  not  alleged  as  the  foundation  of  the  action  or  the  cause  of 
liability  of  the  defendant.  Nor  is  it  stated  that  the  defendant 
accepted  the  bill.  But  the  plaintiff  grounds  his  action  upon  the  de- 
fendant's promise  to  pay  the  amount  mentioned  in  the  bill,  in  consid- 
eration of  1400  crowns  paid  to  his  use  in  France,  and  in  consideration 
that  his  factor  had  drawn  and  delivered  the  bills  to  the  plaintiff's 
factor.  This  idea  of  factorage  is  probably  a  fiction  introduced  for 
the  purpose  of  adapting  the  custom  of  merchants  to  the  common-law 
forms,  and  to  show  a  sufficient  consideration  for  the  assumpsit.  The 
question  of  factorage  was  not  traversable.  .  .  .  This  fiction  might 
perhaps  be  considered  as  part  of  the  custom  of  merchants ;  but  at  any 
rate  it  seems  to  have  been  considered  necessary  in  order  to  create  that 
degree  of  privity  between  the  payee  and  the  acceptor  which  at  that 
time  was  supposed  necessary  to  support  the  action  of  assumpsit. 

But  this  and  the  former  are  declarations  at  common  law.  .  .  . 
They  show  also  that  if  privity  of  contract  was  necessary  at  common 

1  Observe  that  "  usance  "  is  not  added.  It  seems  that  added  time  was  really  grace; 
i.  e.,  indulgence  at  the  choice  of  the  holder. 


12  LAW  MERCHANT. 

law  to  support  the  action  of  assumpsit,  the  law  would  presume  a  priv- 
ity, or  at  least  would  presume  facts  which  constituted  a  privity,  be- 
tween the  payee  and  acceptor,  or  between  an  indorsee  and  a  drawer 
of  a  bill  of  exchange. 

[After  reviewing  later  precedents  before  the  statute  of  Anne,  in 
which  the  fictions  more  or  less  disappear,  it  is  stated  that  in  these 
later  forms  the  liability  of  defendant  under  the  custom  was  thought  a 
sufficient  consideration  to  raise  an  assumpsit  without  averring  those 
intermediate  steps  which  might  be  regarded  as  the  links  of  the  chain 
of  privity  connecting  the  plaintiff  with  the  defendant.  The  reason 
of  this  change,  it  is  added,  was  probably  the  consideration  that  those 
intermediate  links  were  only  fictions  or  presumptions  of  law,  which 
were  never  necessary  to  be  stated.  All  the  foregoing  related  to  for- 
eign bills.] 

It  is  not  ascertained  exactly  at  what  time  inland  hills  first  came 
into  use  in  England,  or  at  what  period  they  were  first  considered  as 
entitled  to  the  privileges  of  bills  of  exchange  under  the  law  merchant. 
But  there  was  a  time  when  the  law  merchant  was  considered  as  "  con- 
fined to  cases  where  one  of  the  parties  was  a  merchant  stranger," 
3  Wooddeson,  109,  and  when  those  bills  of  exchange  only  were  en- 
titled to  its  privileges  one  of  the  parties  to  which  was  a  foreign  mer- 
chant. ...  In  the  case  of  Bromwich  v.  Loyd,  2  Lutw.  1585  (Hil. 
8  Wm.  III.  C.  B.),  Chief  Justice  Treby  said  that  "bills  of  exchange 
at  first  were  extended  only  to  merchants  strangers  trading  with  Eng- 
lish merchants;  and  afterwards  to  inland  bills  between  m,ercliants 
trading  one  with  another  here  in  England;  and  after  that  to  all 
traders  and  dealers,  and  of  late  to  all  persons  trading  or  not."  .  .  . 

.  .  .  Kyd,  in  his  Treatise  on  Bills,  p.  13  (Dublin  edition,  1791), 
speaking  of  promissory  notes,  says,  "  the  period  of  their  introduction 
appears  to  have  been  about  thirty  years  before  the  reign  of  Queen 
Anne;"  but  the  only  authority  he  cites  is  6  Mod.  30  (2  Anne),  the 
case  of  Buller  v.  Crips  ...  in  which  Lord  Holt  says  he  had  con- 
sulted two  of  the  most  famous  merchants  in  London,  who  informed 
him  that  "  it  was  very  frequent  with  them  to  make  such  notes,  and 
that  they  looked  upon  them  as  bills  of  exchange,  and  that  they  had 
been  used  for  a  matter  of  thirty  years."  ...  It  is  certain  that  prom- 
issory notes  were  in  use  upon  the  continent  in  those  commercial  cities 
and  to\\ms  with  which  England  carried  on  the  greatest  trade  long 
before  that  period,  and  were  negotiable  under  the  custom  of  mer- 
chants in  the  countries  from  whence  England  adopted  the  greater 
part  of  her  commercial  law.  They  were  called  bills  obligatory,  or 
bills  of  debt,  and  are  described  with  great  accuracy  by  Mal}Ties,  in 
his  Lex  ^Mercatoria,  pp.  71,  72,  etc.,  where  he  gives  the  form  of  such 
a  bill,  which  is  copied  by  Molloy  in  p.  447  (7th  edition,  London, 


DUNLOP  V.   SILVER.  13 

1722),  and  will  be  found  in  substance  exactly  like  a  modem  promis- 
sory note.  .  .  . 

As  Malynes  says  nothing  of  inland  bills,  and  yet  is  so  very  particu- 
lar respecting  promissory  notes,  the  probability  is,  that  the  antiquity 
of  the  latter  is  greater  than  that  of  the  former,  and  that  they  were 
more  certainly  within  the  custom  of  merchants.  .  .  . 

The  time  when  inland  bills  and  promissory  notes  began  to  be  in 
general  use  in  England  was  probably  about  the  year  1645  or  1646; 
and  their  general  use  at  that  time  may  be  accounted  for  by  the  facts 
stated  in  Anderson's  Hist,  of  Commerce,  vol.  1,  pp.  386,  402,  484, 
492,  493,  519,  and  520,  .  .  .  [Here  follow  quotations  from  the  book 
just  cited,  based  on  "  a  scarce  and  most  curious  small  pamphlet, 
printed  in  1676,  entitled  '  The  mystery  of  the  new-fashioned  gold- 
smiths, or  bankers,  discovered,'  in  eight  quarto  pages."  The  court 
then  proceeds:] 

This  short  history  of  the  goldsmiths  will  account  for  the  sudden 
increase  of  paper  credit  after  the  year  1645,  and  renders  it  extremely 
probable  that  inland  bills  and  promissory  notes  were  in  very  general 
use  and  circulation.  Indeed,  we  know  that  to  be  the  fact  from  the 
cases  in  the  books,  upon  examining  which  we  shall  find  that  there 
was  no  distinction  made  betw^een  inland  bills  of  exchange  and  prom- 
issory notes ;  they  were  both  called  bills ;  they  were  both  called  notes ; 
sometimes  they  were  called  "  bills  or  notes."  Neither  the  word  "  in- 
land "  nor  the  word  "  promissory  "  was  at  that  time  in  use  as  applied 
to  distinguish  the  one  species  of  paper  from  the  other.  .  .  .  [The 
argument  proceeds  that  promissory  notes  were  within  the  custom  of 
merchants  before  the  statute  of  Anne.  Among  a  multitude  of  cases 
the  following,  Carter  v.  Palmer,  12  Mod.  380,  anno  1700,  is  quoted:] 

"  Palmer  had  given  a  note  under  his  hand  in  this  form :  '  I  promise 
to  pay  the  bearer  so  much  money  on  demand.'  Plaintiff  brings  his 
action,  grounding  it  upon  the  custom  of  merchants,  as  if  it  were  a 
bill  of  exchange,  and  avers  no  consideration.  After  verdict,  upon 
motion  in  arrest  of  judgment.  Holt,  Chief  Justice:  'We  will  take 
such  a  note  prima  facie  for  evidence  of  money  lent ;  and  though  they 
have  declared  on  the  custom,  yet  we  must  take  care  that  by  such  a 
drift  the  law  of  England  be  not  changed,  by  making  all  notes  bills 
of  exchange.'  But  all  seemed  to  agree  if  it  were  made  payable  to  him 
or  order,  the  defendant  by  that  form  had  made  it  negotiable,  and  by 
consequence  he  would  be  liable  to  the  action  of  assignee  in  his  own 
name ;  for  if  a  man  who  is  no  merchant  will  draw  a  bill  of  exchange, 
he  is  suable  upon  it  according  to  the  custom  of  merchants,  for  he 
makes  himself  a  merchant  pro  tanto.     And  inland  bills  were  not 


14  LAW    MERCHANT. 

known  till  trade  grew  to  a  great  height;    and  when  they  obtained, 
they  received  the  same  law  with  outlandish  bills.  .  .  .  Et  adjorn" 

But  let  us  proceed  to  examine  the  case  of  Gierke  v.  Martin,  Pasch. 
1  Anne,  B.  W.,  2  Ld.  Eaym.  757;  1  Salk.  129,  upon  which  alone  is 
founded  the  assertion  in  modern  books  that  before  the  statute  of 
Anne  promissory  notes  were  not  assignable  or  indorsable  over  within 
the  custom  of  merchants,  so  as  to  enable  the  assignee  to  bring  an 
action  in  his  own  name  against  the  maker.  The  case  is  thus  reported 
by  Lord  Raymond: 

"  The  plaintiff  brought  an  action  upon  his  case  .  .  .  ;  one  count 
was  upon  a  general  indebitatus  assumpsit  .  .  .  ;  another  was  upon 
the  custom  of  merchants  as  upon  a  bill  of  exchange,  and  showed  that 
the  defendant  gave  a  note  ...  by  which  he  promised  to  pay  to  the 
plaintiff  or  his  order,  etc.  .  .  .  And  it  was  moved  in  arrest  of  judg- 
ment that  this  note  was  not  a  bill  of  exchange  within  the  custom  of 
merchants,  .  .  . 

"  But  Holt,  Chief  Justice,  was  totis  viribus  against  the  action,  and 
said  that  this  could  not  be  a  bill  of  exchange ;  that  the  maintaining 
of  these  actions  upon  such  notes  were  innovations  upon  the  rules  of 
the  common  law,  and  that  it  amounted  to  a  new  sort  of  specialty  un- 
kno\^Ti  to  the  common  law,  and  invented  in  Lombard  street,  which 
attempted,  in  these  matters  of  bills  of  exchange,  to  give  laws  to 
Westminster  Hall."  .  .  . 

[Judgm.ent  in  Gierke  v.  Martin  was  given  for  the  defendant.  Sev- 
eral cases  followed,  the  last  case  before  the  statute  being  Buller  v. 
Crips,  6  Mod,  29  (Mich.  2  Anne,  1703),  a  suit  by  an  indorsee  of  a 
promissory  note  against  the  maker.  Lord  Holt  took  the  same  view 
he  had  taken  in  Gierke  v.  Martin ;  but  the  pressure  against  him  was 
ver}^  strong,  and  he  now  said  that  he  desired  to  speak  with  two  of 
the  most  famous  merchants  in  London  "  of  the  mighty  ill  conse- 
quences that  was  pretended  would  ensue  "  from  adhering  to  his  view 
of  the  subject.  They  told  him  plainly  of  the  custom ;  "  and  the  court 
at  last  took  the  vacation  to  consider  of  it."  Pending  the  decision, 
the  statute  of  Anne  was  passed-  All  these  instruments,  promissory 
notes  included,  had  been  enforced  among  the  merchants  of  London 
at  the  Guildhall,  in  the  Hustings,  long  before  the  statute  of  Anne.] 


STATUTE   THREE   AND   FOUR   ANNE.  15 

STATUTE    THEEE    AND    FOUR   ANNE, 
Chapter  IX.  1704. 

The  merchants  of  Londou  prevailed  over  the  objections  of  Lord  Holt  and  Farlia* 
ment  put  promissory  notes  on  the  same  footing  as  bills  of  exchange. 

Whereas  it  hath  been  held,  That  notes  in  writing,  signed  by  the 
party  who  makes  the  same,  whereby  such  party  promises  to  pay  unto 
any  other  person,  or  his  order,  any  sum  of  money  therein  mentioned, 
are  not  assignable  or  indorsable  over,  within  the  custom  of  merchants, 
to  any  other  person ;  and  that  such  person  to  whom  the  sum  of  money 
mentioned  in  such  note  is  paA^able,  cannot  maintain  an  action,  by  the 
custom  of  merchants,  against  the  person  who  first  made  and  signed 
the  same ;  and  that  any  person  to  whom  such  note  shall  be  assigned, 
indorsed,  or  made  payable,  could  not,  within  the  said  custom  of  mer- 
chants, maintain  any  action  upon  such  note  against  the  person  who 
first  drew  and  signed  the  same ;  therefore  to  the  intent  to  encourage 
trade  and  commerce,  which  will  be  much  advanced,  if  such  notes  shall 
have  the  same  effect  as  inland  bills  of  exchange,  and  shall  be  nego- 
tiated in  like  manner;  be  it  enacted  by  the  Queen's  most  excellent 
majesty,  by  and  with  the  advice  and  consent  of  the  lords  spiritual 
and  temporal,  and  commons,  in  this  present  parliament  assembled, 
and  by  the  authority  of  the  same,  That  all  notes  in  writing,  that 
.  .  ,  shall  be  made  and  signed  by  any  person  or  persons,  body 
politic  or  corporate,  or  by  the  servant  or  agent  of  any  corporation, 
banker,  goldsmith,  merchant,  or  trader,  who  is  usually  intrusted  by 
him,  her,  or  them,  to  sign  such  promissory  notes  for  him,  her,  or  them, 
whereby  such  person  or  persons,  body  politic  and  corporate,  his,  her, 
or  their  servant  or  agent,  as  aforesaid,  doth  or  shall  promise  to  pay 
to  any  other  person  or  persons,  body  politic  and  corporate,  his,  her, 
or  their  order,  or  unto  bearer,  any  sum  of  money  mentioned  in  such 
note,  shall  be  taken  and  construed  to  be,  by  virtue  thereof,  due  and 
payable  to  any  such  person  or  persons,  body  politic  and  corporate,  to 
whom  the  same  is  made  payable;  and  also  every  such  note,  payable 
to  any  person  or  persons,  body  politic  and  corporate,  his,  her,  or  their 
order,  shall  be  assignable  or  indorsable  over,  in  the  same  manner  as 
inland  bills  of  exchange  are  or  may  be,  according  to  the  custom  of 
merchants;  and  that  the  person  or  persons,  body  politic  and  corpo- 
rate, to  whom  such  sum  of  money  is  or  shall  be  by  such  note  made 
payable,  shall  and  may  maintain  an  action  for  the  same,  in  such 
manner  as  he,  she,  or  they  might  do,  upon  any  inland  bill  of  ex- 
change, made  or  drawn  according  to  the  custom  of  merchants,  against 
the  person  or  persons,  body  politic  and  corporate,  who,  or  whose  ser 
vant  or  agent,  as  aforesaid,  signed  the  same;  and  that  any  person 
or  persons,  body  politic  and  corporate,  to  whom  such  note  that  is  pay- 
able to  any  person  or  persons,  body  politic  and  corporate,  his,  her,  or 


16  LAW   MERCHANT. 

their  order,  is  indorsed  or  assigned,  or  the  money  therein  mentioned 
ordered  to  be  paid  by  indorsement  thereon,  shall  and  may  maintain 
his,  her,  or  their  action  for  such  sum  of  money,  either  against  the 
person  or  persons,  body  politic  and  corporate,  who,  or  whose  servant 
or  agent,  as  aforesaid,  signed  such  note,  or  against  any  of  the  persons 
that  indorsed  the  same,  in  like  manner  as  in  cases  of  inland  bills  of 
exchange. 


BUENHAM   V.   ALLEN. 

Supreme  Court  of  Massachusetts,  September,  1854.     1  Gray,  496. 

Suit  is  brought  on  the  instrument,  the  production  of  which  in  evidence  raises  a 
presumption  of  consideration.^ 

Assumpsit  on  a  promissory  note,  by  which,  the  declaration  al- 
leged, the  defendant,  at  South  Hadley,  on  the  30th  of  December, 
1847,  for  value  received,  promised  the  plaintiff  to  pay  him  or  order 
three  hundred  dollars  on  demand;  and  that  the  plaintiff  then  and 
there  demanded  the  same.    Writ  dated  August  19,  1851. 

The  defendant  pleaded  the  general  issue,  and  specified  in  defence : 
1.  \\'ant  of  consideration ;  2.  Failure  of  consideration ;  3.  Payment; 
and  also  denied  the  execution  of  the  note  declared  upon. 

At  the  trial  in  the  Court  of  Common  Pleas,  before  Byington,  J., 
the  plaintiff  gave  in  evidence  the  following  note : 

"$300.  So.  Hadley,  December  30,  1847.  For  value  received,  I 
promise  to  pay  Joseph  Bumham  or  order  on  demand  thee  hundred 
dollars. 

Ezra  Allen." 

The  defendant  objected  that  this  note  did  not  support  the  declara- 
tion, and  that  there  was  a  variance  between  the  declaration  and  the 
proof.  But  the  judge  ruled  that  it  was  a  proper  subject  for  the  con- 
sideration of  the  jury,  and  that  if  they  found  the  word  "  thee  "  was 
intended  for  "  three,"  by  the  defendant,  when  he  signed  the  note,  the 
plaintiff  might  recover. 

The  defendant  contended  that  inasmuch  as  a  special  demand  was 
averred  in  the  declaration,  it  must  be  proved.  But  the  judge  ruled 
that  the  bringing  of  the  action  was  a  sufficient  demand,  and  that  no 
demand  need  be  proved. 

The  defendant  requested  the  judge  to  rule,  upon  these  pleadings, 
that  upon  the  general  issue  the  burden  of  proof  was  upon  the  plain- 
tiff throughout,  and  that  if  upon  that  issue  the  jury  were  left  in 
doubt,  the  plaintiff  was  not  entitled  to  recover.     But  the  judge  in- 

1  N.  I.  L.  §  41. 


BURNHAM  V.  ALLEN.  17 

structed  the  jury,  "  that  the  burden  of  proof  was  on  the  plaintiff  to 
show  that  the  note  was  given  upon  a  valuable  consideration,  and  that, 
if  that  was  doubtful  upon  the  whole  evidence,  he  could  not  recover; 
that  proof  of  the  execution  of  the  note  and  its  production  in  evidence 
made  a  prima  facie  case  for  the  plaintiff,  upon  which  they  might  find 
a  verdict  for  him,  unless  the  defendant  introduced  evidence  which 
showed  either  that  it  was  not  given  for  a  valuable  consideration,  or 
that  the  consideration  had  failed,  or  evidence  to  render  it  doubtful  in 
their  minds  whether  it  was  given  on  a  valuable  consideration;  and 
that  if  not  so  given,  or  if  it  was  doubtful  whether  it  was  given  for  a 
valuable  consideration,  either  for  want  of  consideration  or  for  failure 
of  consideration,  the  plaintiff  could  not  recover."  The  judge  further 
ruled  that  .the  burden  of  proof  was  on  the  defendant  to  show  pay- 
ment. The  verdict  was  for  the  plaintiff,  and  the  defendant  alleged 
exceptions  to  these  rulings. 

[Argument  not  reported.] 

Shaw,  C.  J.  This  is  an  action  on  a  promissory  note  payable  to  the 
plaintiff  or  order  on  demand.  The  declaration  alleged  it  to  be  a  note 
for  three  hundred  dollars.  On  production  of  the  note,  the  sum,  as 
expressed  in  words,  was  "  thee  "  hundred  dollars,  expressed  in  figures 
in  the  margin,  $300.  The  defences  relied  upon,  and  set  out  in  the 
specification  of  defence,  were :  1.  Want  of  consideration ;  2.  Failure 
of  consideration;  and  3.  Payment.  The  defendant  also  denied  the 
execution  of  the  note. 

The  questions  in  the  case  arise  upon  the  correctness  of  the  direc- 
tions given  by  the  judge,  as  stated  in  the  bill  of  exceptions. 

On  the  first  point,  we  think  the  court  rightly  left  it,  as  a  matter  of 
fact,  for  the  jury ;  and  that,  if  they  found  the  word  "  thee  "  was  in- 
tended for  "  three,"  by  the  defendant,  when  he  signed,  the  plaintiff 
might  recover.  We  see  not  how  such  a  question  could  be  otherwise 
disposed  of.  The  maker  certainly  meant  some  number  of  hundred 
dollars;  otherwise  he  intended  an  imposition  and  fraud,  which  can- 
not be  presumed.  Bad  spelling  will  not  vitiate,  if  the  sound  is  the 
same.  But  because  the  sound  slightly  varies  from  that  of  any  known 
number,  we  think  it  can  hardly  be  said,  that  the  instrument  is  void; 
but  if  not,  the  only  alternative  is  to  adopt  the  word  to  which  it  comes 
nearest.  There  is  no  other  single  word  expressive  of  number,  which 
could  stand  in  its  place,  consistently  with  the  sense  of  the  sentence, 
to  which  it  would  be  as  near  as  to  that  of  "  three,"  or  for  which 
"  thee  "  could  have  been  erroneously  used.  If  the  Arabic  numerals 
in  the  margin  were  manifestly  in  the  same  handwriting,  and  written 
at  the  same  time,  it  would  be  a  circumstance  leading  to  the  same 
result,  if  the  other  considerations  were  not  alone  sufficient. 

It  appearing  on  the  declaration  that  the  plaintiff  had  averred  a 

2 


18  LAW   MERCHANT. 

special  demand,  it  was  insisted  by  the  defendant,  that  the  plaintiff 
could  not  recover  without  proof  of  a  special  demand.  But  we  are  of 
opinion,  that  the  court  rightly  instructed  the  jury,  that  such  a  de- 
mand was  not  necessary  as  a  condition  precedent  to  the  maintenance 
of  an  action.  Even  in  the  old  form  of  declaration,  where  the  only 
duty  from  the  defendant  to  the  plaintiff  was  the  payment  of  money, 
and  the  suit  was  to  enforce  such  payment,  the  averment,  "  though 
often  requested,"  was  fully  sustained  by  bringing  the  action,  which 
was  of  itself  a  sufficient  demand.^ 

Perhaps,  on  a  note  like  this,  payable  on  demand,  not  expressed  to 
be  with  interest,  a  specific  demand  should  be  averred  and  proved,  at 
some  time,  if  the  holder  seeks  to  charge  the  maker  with  interest, 
from  any  time  anterior  to  the  date  of  the  writ. 

On  the  subject  of  the  burden  of  proof,  the  court  are  of  opinion 
that  the  directions  were  precise  and  correct,  and  well  adapted  to  the 
case.  The  court  ruled,  that  the  burden  of  proof  was  on  the  plaintiff 
to  show  that  the  note  was  given  upon  a  valuable  consideration,  and 
if  that  was  doubtful  upon  the  whole  evidence  he  could  not  recover; 
that  proof  of  the  execution  of  the  note  and  its  production  in  evidence 
made  a  prima  facie  case  for  the  plaintiff,  upon  which  they  might  find 
a  verdict  for  him,  unless,  etc.  This  is  strictly  correct,  but  being  ex- 
pressed in  technical  terms,  it  may  be  useful  to  explain  it  a  little.  A 
promissory  note  is  given  "  for  value  received ;  "  ^  this  is  signed  by  the 
maker,  and  is  an  admission  on  his  part  that  value  has  been  received 
for  it  which  is  a  good  consideration.  Its  being  produced  by  the  holder 
is  proof  that  after  being  signed  it  was  delivered  to  the  promisee,  and 
is  therefore  evidence  of  a  contract,  on  good  consideration,  between 
promisor  and  promisee,  under  the  promisor's  hand.  But  the  law 
holds,  and  has  long  held,  that,  as  between  the  original  parties,  such 
proof  is  not  conclusive.  It  is  therefore  prima  facie  evidence,  that  is, 
it  is  competent  evidence  tending  to  prove  a  proposition  of  fact,  and 
of  course,  if  not  rebutted  or  controlled  by  other  evidence,  will  stand 
as  sufficient  proof  of  such  proposition  of  fact.  If,  then,  on  a  trial, 
when  a  note  is  sued  for  by  the  promisee  against  the  promisor,  the 
plaintiff  produces  and  reads  his  note  for  value  received,  and  the  sig- 
nature is  admitted  or  proved,  he  has  ordinarily  no  occasion  to  go 
further.  He  has  the  burden  of  proof  to  show  a  consideration ;  but 
he  sustains  that  burden  by  his  prima  facie  evidence,  which,  if  not 
rebutted,  stands  as  conclusive  evidence. 

This,  though  expressed  in  technical  terms,  is,  we  think,  the  com- 
mon sense  view  taken  of  a  promissory  note  by  men  of  busin^-^-.  and 
reconciles  the  rules  of  law  with  the  principles  and  practice  of  :v-lual 
business.  Allien  a  man  takes  a  promissorv  note,  for  value  r^  ved, 
promising  to  pay  money  to  him  or  his  order,  he  believes  that  ^     has 

1  CI.  Estes  V.  Tower,  102  Mass.  05,  post,  p.  S3. 

2  Cf.  N.  I.  L.  §  23,  2. 


BURNHAM    V.   ALLEN.  19 

a  security  complete  in  itself,  and  that  he  has  no  occasion  to  provide 
and  preserve  other  evidence,  to  show  the  consideration  on  which  it  was 
given.  And  in  a  vast  majority  of  cases  the  security  is  not  only  com- 
plete in  itself,  but  is  in  fact  conclusive,  because  no  evidence  can  exist 
which  will  control  and  rebut  such  proof  of  consideration.  But  the 
law  has  further  provided,  that  whilst  the  note  remains  as  a  contract 
between  the  original  parties,  that  is,  not  transferred  to  another  by 
indorsement,  the  consideration  may  be  inquired  into ;  ^  and  therefore, 
if  upon  all  the  evidence  in  the  case,  whether  offered  by  the  plaintiff 
or  the  defendant,  it  appears  that  there  was  no  consideration,  or  that 
the  consideration  has  failed,  by  evidence  sufficient  to  rebut  the  prima 
facie  evidence  arising  from  the  signature  and  production  of  the  note, 
it  will  constitute  a  good  defence ;  and  as  the  burden  is  on  the  plain- 
tiff, to  prove  a  good  consideration,  if  the  whole  evidence,  offered  on 
both  sides,  leaves  it  in  doubt  whether  there  was  a  good  consideration 
or  not,  the  plaintiff  fails  of  making  out  his  case,  and  the  defendant 
will  be  entitled  to  a  verdict. 

We  have  said  that  the  evidence  may  come  from  either  side.  It  may 
come  from  the  plaintiff,  as  where  an  attesting  witness  or  other  person 
testifies  that  the  note  was  given  on  settlement  of  an  account,  and  on 
the  production  of  the  account  by  the  plaintiff,  it  appears  that  there 
were  so  many  mistakes  and  errors,  that  there  was  no  balance  due; 
and  if  the  note  was  given  for  such  supposed  balance  only,  it  will  ap- 
pear that  the  note  was  given  without  consideration.  In  general,  the 
proof  of  want  or  failure  of  consideration  must  commence  on  the  part 
of  the  defendant,  after  the  production  and  proof  of  the  note  by  the 
plaintiff,  not  because  the  defendant  has  the  burden,  or  the  burden  of 
proof  has  shifted,  but  because  the  plaintiff  has  ofl'ered  prima  facie 
proof,  sufficient  to  sustain  the  burden  of  proof  on  his  part,  unless  it 
is  rebutted  and  controlled  by  counter  proof. 

This  view,  we  think,  was  expressed  in  the  residue  of  the  charge  of 
the  judge  to  the  jury,  that  prima  facie  evidence  would  warrant  a 
verdict  for  the  plaintiff,  unless  the  defendant  introduced  evidence, 
which  either  showed  that  the  note  was  not  given  for  a  valuable  con- 
sideration, or  that  the  consideration  failed,  or  evidence  to  render  it 
doubtful  in  the  minds  of  the  jury  whether  the  note  was  given  on  a 
valuable  consideration,  or  the  consideration  failed,  or  not,  and  if  not, 
or  if  the  consideration  had  failed,  the  plaintiff  could  not  recover. 

When  in  the  above  sentence  the  learned  judge  used  the  phrase, 
"unless  the  defendant  introduced  evidence,"  we  understand  him  to 
mean,  as  above  stated,  that  after  the  production  and  proof  of  the 
signing  of  the  note,^  and  after  thus  establishing  a  prima  facie  case, 

1  N.  L  L.  §  45. 

2  In  many  jurisdictions  it  is  provided  by  statute  tliat  sipinatures  need  not  be  proved 
unless  they  are  specially  denied  and  proof  is  demanded.  Cf.  Rev.  Laws  of  Mass.  ch. 
173,  §  86. 


20  LAW  MERCHANT. 

the  plaintiff  would  be  entitled  to  a  verdict,  unless  the  defendant  could 
show,  from  the  whole  evidence,  want  or  failure  of  consideration,  or 
leave  the  proof  so  doubtful,  as  to  enable  the  jury  to  say,  that  the 
plaintiff  had  not  satisfactorily  proved  a  consideration. 

The  court  further  ruled,  that  the  burden  of  proof  is  on  the  defend- 
ant to  prove  payment.  The  correctness  of  this  has  not  been  called  in 
question,  and  is  too  obvious  to  require  comment. 

Exceptions  overruled. 


LYSAGHT   V.   BRYANT.  21 

CHAPTER   II. 

DELIVERY. 

[Delivery  is  the  transfer  of  a  thing,  under  or  followed  by  cir- 
cumstances such  as  to  entitle  the  transferee  to  hold  against  the 
transferor.^] 


LYSAGHT   V.   BEYANT. 
Court  of  Common  Pleas  of  England,  January,  1850.     9  C.  B.  45. 
Transfer  is  a  question  of  control. 

Assumpsit.  The  first  count  of  the  declaration  stated  that  the  de- 
fendant, on  the  7th  of  May,  1847,  made  his  bill  of  exchange  in  writ- 
ing, and  directed  the  same  to  one  Matthews,  and  thereby  required  the 
said  Matthews  to  pay  to  his,  the  defendant's,  order,  the  sum  of  £800, 
six  months  after  the  date  thereof;  that  the  defendant  then  indorsed 
the  said  bill  to  one  James  Lysaght  and  one  William  Smithett,  who 
then  indorsed  the  same  to  the  plaintiff;  and  that  Matthews  did  not 
pay  the  same,  although  duly  presented,  —  of  which  the  defendant  had 
notice,  etc. 

Pleas,  amongst  others,  —  first,  that  the  defendant  had  no  notice 
of  the  dishonor  of  the  bill  by  the  drawee;  secondly,  that  Lysaght  & 
Smithett  did  not  indorse  the  bill,  in  manner  and  form  as  in  the  first 
count  alleged. 

The  cause  was  tried  before  Wilde,  C.  J.,  at  the  sittings  in  London 
after  the  last  term.  It  appeared  that  James  Lysaght  and  William 
Smithett  had  carried  on  business  in  partnership  together,  as  East 
India  merchants;  and  that  the  firm  being  indebted  to  the  plaintiff, 
Admiral  Lysaght,  the  father  of  James  Lysaght,  in  the  sum  of  £6000, 
James  Lysaght,  in  July  or  August,  1847,  with  Smithett's  concur- 
rence, and  in  his  presence,  indorsed  the  bill  in  question  to  the  plain- 
tiff. To  prove  this,  James  Lysaght  was  called.  He  stated  that,  after 
he  had  so  indorsed  the  bill,  he  held  it  as  his  father's  agent,  keeping 
it  either  in  a  separate  part  of  the  cash-box,  or  at  his  chambers  in 
Eegent  Street.  It  did  not  appear  that  the  fact  of  the  indorsement 
had  been  communicated  by  the  son  to  the  father. 

The  bill  was  duly  presented  on  the  10th  of  November,  when  it 
became  due,  but  was  not  paid;  whereupon  Lysaght  &  Smithett,  on 
the  11th  of  November,  gave  the  defendant  the  following  notice  of 
dishonor : 

1  N.  I.  L.  §  33. 


22  DELIVERY. 

**  Sir,  —  "We  beg  to  inform  you  that  your  draft  on  Mr.  Matthews, 
•tlated  the  7th  of  May  last,  at  six  months'  date,  for  £800,  was  duly 
'.presented,  at,  etc.,  for  payment,  when  the  answer  given  to  the  notary 
was,  '  no  efiects.'  The  bill  is  now  in  our  possession,  and  we  require 
•you  to  take  it  up  immediately.  Meanwhile,  we  request  you  to  take 
notice,  we  do  not  release  you  from  responsibility  by  holding  it  over. 

Yours,  etc., 

Lysaght,  Smithett,  &  Co." 

On  the  part  of  the  defendant,  it  was  proved  that  it  was  the  custom 
of  notaries  in  London  to  keep  copies  of  all  bills  that  pass  through 
their  hands,  with  all  indorsements  thereon,  and  that  this  practice 
was  observed  at  the  office  of  Duff,  the  notary  by  whom  the  bill  was 
presented.  And  the  notary's  book  was  produced,  and  the  clerk  who 
entered  the  bill  therein,  called;  and  from  these  it  appeared,  assuming 
the  entry  to  have  been  correctly  made,  that  there  was  no  indorsement 
by  Lysaght  &  Smithett  upon  the  bill  at  the  time  of  its  presentment. 

It  was  then  submitted  that  the  notice  of  dishonor  was  insufficient. 

The  Lord  Chief  Justice  reserving  that  point,  left  it  to  the  jury  to 
say  whether. the  indorsement  by  Lysaght  &  Smithett  was  made  before 
or  after  the  bill  arrived  at  maturity. 

A  verdict'having  been  found  for  the  plaintiff,  Byles,  Serjeant,  pur- 
suant to  the  leave  reserved  to  him  at  the  trial,  moved  for  a  rule  nisi 
to  enter  the  verdict  for  the  defendant,  or  for  a  new  trial  on  the 
ground  that  the  verdict  was  against  evidence. 

[Argument  reported.] 

Cresswell,  J.  .  .  .  Two  questions  arose  in  this  case,  —  first, 
whether  the  defendant  had  received  a  sufficient  notice  of  dishonor, 
—  secondly,  whether  Lysaght  &  Smithett  indorsed  the  bill  before  it 
became  due.  The  decision  of  the  first  question  depends  in  some  de- 
gree upon  the  second;  because,  whether  the  notice  was  sufficient  or 
not,  may  depend  upon  whether  there  was  a  proper  indorsement.  Mere 
writing  on  the  back  of  the  bill  is  not  enough  to  constitute  an  indorse- 
ment ;  there  must  be  a  delivery,  or  something  equivalent  to  a  delivery, 
of  the  bill  to  the  indorsee.  Here  the  fact  has  been  disposed  of  by  the 
jury;  and  I  think  there  was  evidence  enough  to  justify  the  conclusion 
they  came  to.  James  Lysaght  swore  positively  that  the  bill  was  in- 
dorsed in  the  name  and  with  the  concurrence  of  the  firm,  in  July  or 
August;  and  he  further  stated,  that  ever  since  the  indorsement  it 
had  been  kept  by  him,  as  his  father's  agent,  apart  from  the  securities 
of  the  firm.  That  being  so,  it  seems,  from  the  cases,  that  the  holder 
of  a  bill  may  avail  himself  of  a  notice  of  dishonor  given  in  due  time 
by  a  prior  indorsee,  provided  he  himself  is  in  a  condition  to  sue  the 
party  by  whom  the  notice  was  given.     Here,  Lysaght  the  younger. 


BAXENUALE   V.  BENNETT.  23 

holding  the  bill  as  his  father's  agent,  duly  presented  it,  and  had  it 
returned  to  him  dishonored.  Notice  of  that  fact  to  him,  therefore, 
operating  as  notice  to  the  firm,  the  present  plaintiff  was  entitled  to 
sue  them,  and,  consequently,  is  in  a  condition  to  avail  himself  of  the 
notice  of  dishonor  given  by  them  to  the  defendant. 

Maule,  J.,  gave  concurring  opinion. 

Williams,  J.,  and  Wilde,  C.  J.,  concurred. 

Bule  refused. 

Note.  — In  Purviance,  Adm'r,  v.  Jones,  120  Ind.  162,  164,  it  was  said  by 
Mitchell,  J. :  "  AVhile  it  is  not  indispensable  that  there  should  have  been  an 
actual,  manual  transfer  of  the  instrument  from  the  maker  to  the  payee,  yet 
to  constitute  a  delivery  it  must  appear  that  the  maker,  in  some  way,  evinced 
an  intention  to  make  it  an  enforceable  obligation  against  himself,  according 
to  its  terms,  by  surrendering  control  over  it  and  intentionally  placing  it  under 
the  power  of  the  payee,  or  of  some  third  person  for  his  use."  In  that  case  the 
appellant's  intestate  was  indebted  to  the  appellee,  Jones,  and  was  requested 
by  the  latter  to  give  him  a  mortgage  as  security  for  the  amount.  This  the . 
intestate  refused  to  do,  giving  as  a  reason  for  his  refusal,  that  he  had  signed  a 
note  for  the  amount  payable  to  Jones,  and  had  left  it  in  a  bank  for  the  bene- 
fit of  Jones.  After  the  death  of  the  intestate,  the  note  was  found  among  his 
private  papers  in  the  bank,  of  which  the  intestate  was  the  president.  There 
was  no  finding  that  the  note  had,  in  fact,  been  left  with  the  bank  for  the  bene- 
fit of  the  payee,  Jones.  The  court  held  that  there  had  been  no  delivery,  as 
there  was  nothing  to  indicate  that  the  intestate  had  surrendered  control  or 
that  the  note  was  within  the  power  of  the  appellee,  or  of  any  person  for  his 
benefit.     Cf.  Giddiugs  v.  Giddings's  Adm'r,  51  Vt.  227,  post,  p.  30. 


BAXENDALE    v.    BENNETT. 

Court  of  Appeal  of  England,  July,  1878.     L.  R.  3  Q.  B.  D.  525. 

Negligence  of  the  promisor,  followed  by  action  thereon  by  the  transferee,  is  such 
a  circumstance ;  but  the  negligence  must  be  the  proximate  cause  of  loss. 

Action  commenced  on  the  10th  July,  1876,  on  a  bill  of  exchange, 
dated  the  11th  of  March,  1872,  for  £50  drawn  by  W.  Cartwright  and 
accepted  by  the  defendant,  and  of  which  the  plaintiff  was  the  holder, 
and  for  interest. 

At  the  trial  before  Lopes,  J.,  without  a  jury,  at  the  Hilary  Sittings 
in  Middlesex,  the  following  facts  were  proved:  The  bill,  dated  the 
11th  of  March,  1872,  on  which  the  action  was  brought,  purported  to 
be  drawn  by  one  W.  Cartwright  on  the  defendant,  payable  to  order 
at  three  months'  date.  It  was  indorsed  in  blank  by  Cartwright,  and 
also  by  one  H.  T.  Cameron.  The  plaintiff  received  the  bill  from 
Cameron  on  the  3d  of  June,  1872,  and  was  the  bona  fide  holder  of  it, 
without  notice  of  fraud,  and  for  a  valuable  consideration. 


24  DELIVERY. 

One  J.  F.  Holmes  had  asked  the  defendant  for  his  acceptance  to 
an  accommodation  bill,  and  the  defendant  had  written  his  name  across 
a  paper  which  had  an  impressed  bill  stamp  on  it,  and  had  given  it  to 
Holmes  to  fill  in  his  name,  and  then  to  use  it  for  the  purpose  of  rais- 
ing money  on  it.  Afterwards  Holmes,  not  requiring  accommodation, 
returned  the  paper  to  the  defendant  in  the  same  state  in  which  he 
had  received  it  from  him.  The  defendant  then  put  it  into  a  drawer, 
which  was  not  locked,  of  his  writing-table  at  his  chambers,  to  which 
his  clerk,  laundress,  and  other  persons  coming  there  had  access.  He 
had  never  authorized  Cartwright  or  an}^  person  to  fill  up  the  paper 
with  a  drawer's  name,  and  he  believed  that  it  must  have  been  stolen 
from  his  chambers. 

On  these  facts,  the  learned  judge  found  that  the  bill  was  stolen 
from  the  defendant's  chambers,  and  the  name  of  the  drawer  after- 
wards added  without  the  defendant's  authority;  but  that  the  defend- 
ant had  so  negligently  dealt  with  the  acceptance  as  to  have  facilitated 
the  theft;  he  therefore  ruled,  upon  the  authority  of  Young  v.  Grote, 
4  Bing.  253,  and  Ingham  v.  Primrose,  7  C.  B.  n.  s.  82 ;  28  L.  J. 
C.  P.  294,  that  the  defendant  was  liable,  and  directed  judgment  to 
be  entered  for  the  plaintiff  for  £50  and  costs. 

[Argument  reported.] 

Bka]mwell,  L.  J.  I  am  of  opinion  that  this  judgment  cannot  be 
supported.  The  defendant  is  sued  on  a  bill  alleged  to  have  been 
drawn  by  W.  Cartwright  on  and  accepted  by  him.  In  very  truth  he 
never  accepted  such  a  bill ;  and  if  he  is  to  be  held  liable,  it  can  only 
be  on  the  ground  that  he  is  estopped  to  deny  that  he  did  so  accept 
such  a  bill.  Estoppels  are  odious,  and  the  doctrine  should  never  be 
applied  without  a  necessity  for  it.  It  never  can  be  applied  except  in 
cases  where  the  person  against  whom  it  is  used  has  so  conducted  him- 
self, either  in  what  he  has  said  or  done,  or  failed  to  say  or  do,  that 
he  would,  unless  estopped,  be  saying  something  contrary  to  his  former 
conduct  in  what  he  had  said  or  done,  or  failed  to  say  or  do.  Is 
that  the  case  here?  Let  us  examine  the  facts.  The  defendant  drew 
a  bill  (or  what  would  be  a  bill  had  it  had  a  drawer's  name)  without 
a  drawer's  name,  addressed  to  himself,  and  then  wrote  what  was  in 
terms  an  acceptance  across  it.  In  this  condition,  it,  not  being  a  bill, 
was  stolen  from  him,  filled  up  with  a  drawer's  name,  and  transferred 
to  the  plaintiff,  a  bona  fide  holder  for  value.  It  may  be  that  no  crime 
was  committed  in  the  filling  in  of  the  drawer's  name,  for  the  thief 
may  have  taken  it  to  a  person  telling  him  it  was  given  by  the  de- 
fendant to  the  thief  with  authority  to  get  it  filled  in  with  a  drawer's 
name  by  any  person  he,  the  thief,  pleased.  This  may  have  been  be- 
lieved and  the  drawer's  name  bona  fide  put  by  such  person.  I  do  not 
say  such  person  could  have  recovered  on  the  bill ;  I  am  of  opinion  he 


BAXENDALE   V.   BENNETT.  25 

could  not ;  but  what  I  wish  to  point  out  is  that  the  bill  might  be  made 
a  complete  instrument  without  the  commission  of  any  crime  in  the 
completion.  But  a  crime  was  committed  in  this  case  by  the  stealing 
of  the  document,  and  without  that  crime  the  bill  could  not  have  been 
complete,  and  no  one  could  have  been  defrauded.  Why  is  not  the 
defendant  at  liberty  to  show  this?  VThj  is  he  stopped?  What  has 
he  said  or  done  contrary  to  the  truth,  or  which  should  cause  any  one 
to  believe  the  truth  to  be  other  than  it  is  ?  Is  it  not  a  rule  that  every 
one  has  a  right  to  suppose  that  a  crime  will  not  be  committed,  and  to 
act  on  that  belief?  Where  is  the  limit  if  the  defendant  is  estopped 
here  ?  Suppose  he  had  signed  a  blank  cheque,  with  no  payee,  or  date, 
or  amount,  and  it  was  stolen,  would  he  be  liable  or  accountable,  not 
merely  to  his  banker  the  drawee,  but  to  a  holder?  If  so,  suppose 
there  was  no  stamp  law,  and  a  man  simply  wrote  his  name,  and  the 
paper  was  stolen  from  him,  and  somebody  put  a  form  of  a  cheque 
or  bill  to  the  signature,  would  the  signer  be  liable?  I  cannot  think 
so.  But  what  about  the  authorities?  It  must  be  admitted  that  the 
cases  of  Young  v.  Grote,  4  Bing.  253,  and  Ingham  v.  Primrose, 
7  C.  B.  N.  s.  82 ;  28  L.  J.  C.  P.  294,  go  a  long  way  to  justify  this 
judgment;  but  in  all  those  cases,  and  in  all  the  others  where  the 
alleged  maker  or  acceptor  has  been  held  liable,  he  has  voluntarily 
parted  with  the  instrument;  it  has  not  been  got  from  him  by  the 
commission  of  a  crime.  This,  undoubtedly,  is  a  distinction,  and  a 
real  distinction.  The  defendant  here  has  not  voluntarily  put  into 
any  one's  hands  the  means,  or  part  of  the  means,  for  committing  a 
crime. 

But  it  is  said  that  he  has  done  so  through  negligence.  I  confess 
I  think  he  has  been  negligent ;  that  is  to  say,  I  think  if  he  had  had 
this  paper  from  a  third  person,  as  a  bailee  bound  to  keep  it  with 
ordinary  care,  he  would  not  have  done  so.  But  then,  this  negligence 
is  not  the  proximate  or  effective  cause  of  the  fraud.  A  crime  was 
necessary  for  its  completion.  Then  the  Bank  of  Ireland  v.  Evans's 
Trustees,  5  H.  L.  C.  389,  shows  under  such  circumstances  there  is 
no  estoppel.  It  is  true  that  was  not  the  case  of  a  negotiable  instru- 
ment; but  those  who  complained  of  the  negligence  were  the  parties 
immediately  affected  by  the  forged  instrument. 

Brett,  L.  J.  In  this  case  I  agree  with  the  conclusion  at  which 
my  Brother  Bramwell  has  arrived,  but  not  with  his  reasons.  The 
defendant  signed  a  blank  acceptance  and  gave  it  to  a  nerson  who 
wanted  money  that  he  might  get  it  discounted ;  that  person  sent  the 
blank  acceptance  back  to  the  defendant,  who  put  it  into  a  drawer  in 
his  room ;  the  room  was  not  a  place  of  general  resort,  and  the  drawer 
into  which  the  acceptance  was  put  was  left  unlocked;  somebody  not 
a  servant  of  the  defendant  stole  it,  and  it  was  filled  up  by  a  different 
person  from  him  to  whom  the  acceptance  was  originally  given  and 
who  had  returned  it.     On  these  facts,  Lopes,  J.,  held  that  the  do- 


26  DELIVERY. 

fondant  had  been  guilty  of  negligence  and  was  therefore  liable  on  the 
bill  to  the  plaintilL  Bramwcll,  L.  J.,  says  that  the  defendant  is  not 
liable,  because,  if  he  be  guilty  of  negligence,  the  negligence  is  not  the 
proximate  or  effective  cause  of  the  fraud.  It  seems  to  me  that  the 
defendant  never  authorized  the  bill  to  be  filled  in  with  a  drawer's 
name,  and  he  cannot  be  sued  on  it.  I  do  not  think  it  right  to  say 
that  the  defendant  was  negligent.  The  law  as  to  the  liability  of  a 
person  who  accepts  a  bill  in  blank,  is  that  he  gives  an  apparent 
authority  to  the  person  to  whom  he  issues  it  to  fill  it  up  to  the 
amount  that  the  stamp  will  cover:  he  does  not  strictly  authorize 
him,  but  enables  him  to  fill  it  up  to  a  greater  amount  than  was  in- 
tended. Where  a  man  has  signed  a  blank  acceptance,  and  has  issued 
it,  and  has  authorized  the  holder  to  fill  it  up,  he  is  liable  on  the  bill, 
whatever  the  amount  may  be,  though  lie  has  given  secret  instructions 
to  the  holder  as  to  the  amount  for  which  he  shall  fill  it  up;  he  has 
enabled  his  agent  to  deceive  an  innocent  party,  and  he  is  liable.^ 
Sometimes  it  is  said  that  the  acceptor  of  such  a  bill  is  liable  because 
bills  of  exchange  are  negotiable  instruments,  current  in  like  manner 
as  if  they  were  gold  or  bank  notes;  but  whether  the  acceptor  of  a 
blank  bill  is  liable  on  it  depends  upon  his  having  issued  the  accept- 
ance intending  it  to  be  used.  No  case  has  been  decided  where  the 
acceptor  has  been  held  liable  if  the  instrument  has  not  been  delivered 
by  the  acceptor  to  another  person. 

In  this  case  it  is  true  that  the  defendant,  after  writing  his  name 
across  the  stamped  paper,  sent  it  to  another  person  to  be  used.  When 
he  sent  it  to  that  person,  if  he  had  filled  it  in  to  any  amount  that  the 
stamp  would  cover  the  defendant  would  be  liable,  because  he  sent  it 
with  the  intention  that  it  should  be  acted  upon;  but  it  was  sent  back 
to  the  defendant,  and  he  was  then  in  the  same  condition  as  if  he  had 
never  issued  the  acceptance.  The  case  is  this :  the  defendant  accepts 
a  bill  and  puts  it  into  his  drawer;  it  is  as  if  he  had  never  issued 
it  with  the  intention  that  it  should  be  filled  up;  it  is  as  if  after 
having  accepted  the  bill  he  had  left  it  in  his  room  for  a  moment  and 
a  thief  came  in  and  stole  it.  He  has  never  intended  that  the  bill 
should  be  filled  up  by  anybody,  and  no  person  was  his  agent  to  fill 
it  up.^ 

Then  it  has  been  said  that  the  defendant  is  liable  because  he  has 
been  negligent;  but  was  the  defendant  negligent?  As  observed  by 
Blackburn,  J.,  in  Swan  v.  North  British  Australasian  Company,  2  H. 
&  C.  175;  32  L.  J.  Ex.  273,  there  must  be  the  neglect  of  some  duty 
owing  to  some  person  —  here  how  can  the  defendant  be  negligent 
who  owes  no  duty  to  anybody  —  against  whom  was  the  defendant 
negligent,  and  to  whom  did  he  owe  a  duty?  He  put  the  bill  into  a 
drawer  in  his  own  room;  to  say  that  was  a  want  of  due  care  is  im- 
possible ;  it  was  not  negligence  for  two  reasons,  first,  he  did  not  owe 
1  N.  I.  L.  §  31.  2  Id.  §  32. 


BAXENDALE   V.    BENNETT.  27 

any  duty  to  any  one,  and  secondly,  he  did  not  act  otherwise  than  in 
a  wa}^  which  an  ordinary  careful  man  would  act. 

As  to  the  authorities  that  have  been  cited:  In  Schultz  v.  Astley, 
2  Bing.  N.  C.  5-44,  the  blank  acceptance  had  been  filled  up  by  a 
stranger  and  a  fraud  had  been  committed ;  nevertheless,  the  acceptor 
was  held  to  be  liable.  There,  however,  the  acceptance  had  been  issued 
and  it  was  intended  that  it  should  be  filled  up  by  some  one;  but 
Crompton,  J.,  in  Stoessiger  v.  South  Eastern  Ey.  Co.,  3  E.  &  B.  at 
p.  556,  said  that  the  case  had  gone  to  the  utmost  extent  of  the  law. 
I  do  not  think  that  the  doctrine  there  laid  down  ought  to  be  extended. 
In  Ingham  v.  Primrose,  7  C.  B.  n.  s.  82;  28  L.  J.  C.  P.  294,  the 
acceptor  of  a  bill  of  exchange,  with  the  intention  of  cancelling  it, 
tore  it  into  two  pieces  and  threw  them  into  the  street,  they  were 
picked  up  by  the  indorser,  joined  together,  and  the  bill  was  put  into 
circulation.  The  acceptor  was  held  liable  because,  said  the  court, 
although  he  did  intend  to  cancel  it,  yet  he  did  not  cancel  it.  It 
seems  to  me  to  be  diflBcult  to  support  that  case,  and  the  correct  mode 
of  dealing  with  it  is  to  say  we  do  not  agree  with  it.  In  Young  v. 
Grote,  4  Bing.  253,  Young  left  a  blank  cheque  with  his  wife,  and  in 
filling  up  the  cheque  for  fifty  pounds  the  word  "  fifty  "  was  written  in 
the  middle  of  the  line,  ample  space  being  left  for  the  insertion  of 
other  words.  By  a  forgery,  before  the  word  "  fifty,"  the  words  "  three 
hundred  and"  were  inserted.  Notwithstanding  the  forgery,  the 
court  held  Young  liable.  It  is  said  that  the  case  may  be  upheld  on 
the  ground  that  Young  owed  a  duty  to  his  own  bankers,  and  that  he 
was  guilty  of  negligence  in  not  drawing  his  cheques  on  them  with 
ordinary  care;  but  that  case  does  not  govern  the  present,  it  only 
applies  to  cases  between  bankers  and  mere  customers.  In  Bank  of 
Ireland  v.  Evans's  Charity  Trustees,  5  H.  L.  C.  389,  Parke,  B.,  in 
delivering  the  opinion  of  the  judges  in  the  House  of  Lords,  remarks, 
with  reference  to  Young  v.  Grote,  4  Bing.  253,  "  In  that  case  it  was 
held  to  have  been  the  fault  of  the  drawer  of  the  cheque  that  he  misled 
the  banker  on  whom  it  was  drawn  by  want  of  proper  caution  in  the 
mode  of  drawing  the  cheque,  which  admitted  of  easy  interpolation, 
and  consequently  that  the  drawer,  having  thus  caused  the  banker  to 
pay  the  forged  cheque  by  his  own  neglect  in  the  mode  of  drawing  the 
cheque  itself,  could  not  complain  of  that  payment."  He  then  gives 
instances  in  which  a  person  would  not  be  liable  and  which  govern  the 
present  case.  "  If  a  man  should  lose  his  cheque  book  or  neglect  to 
lock  his  desk  in  which  it  is  kept  and  a  servant  or  stranger  should  take 
it,  it  is  impossible,  in  our  opinion,  to  contend  that  a  banker  paying  his 
forged  cheque  would  be  enabled  to  charge  his  customer  with  that 
payment.  Would  it  be  contended  that,  if  he  kept  his  goods  so  negli- 
gently that  a  servant  took  them  and  sold  them,  he  must  be  considered 
as  having  concurred  in  the  sale  and  so  be  disentitled  to  sue  for  their 
conversion  on  a  demand  and  refusal  ?  "    Lord  Cranworth,  speaking 


28  DELIVERY. 

of  Young  V.  Grotc,  4  Bing.  253,  says  that  case  went  upon  the  ground, 
whether  correctly  arrived  at  in  point  of  fact  is  immaterial,  that  in 
order  to  make  negligence  a  good  answer  there  must  be  something  that 
amounts  to  an  estoppel  or  ratification  —  "that  the  plaintiff  was 
estopped  from  saying  that  he  did  not  sign  the  cheque,"  and  then  he 
says  the  doctrine  of  ratification  is  well  illustrated  by  Coles  v.  Bank 
of  England,  10  A.  &  E.  437.  I  think  the  observations  made  by  the 
Lords  in  the  case  of  Bank  of  Ireland  v.  Evans's  Charity  Trustees, 
5  H.  L.  C.  389,  have  shaken  Young  v.  Grote,  4  Bing.  253,  and  Coles 
V.  Bank  of  England,  10  A.  &  E.  437,  as  authorities.^  In  the  present 
case  I  think  there  was  no  estoppel,  no  ratification,  and  no  negligence, 
and  that  the  defendant  is  entitled  to  our  judgment. 

Baggallay,  L.  J.,  concurred  that  the  judgment  ought  to  be  entered 
for  the  defendant. 

Judgment  for  the  defendant. 


FEAEING  V.  CLAEK. 

Supreme  Court  of  Massachusetts,  September,  1860.     10  Gray,  74. 

So  is  the  wrongful  transfer  of  the  instrument  by  a  person  intrusted  therewith,  such 
as  a  custodian  or  agent. 

Action  of  contract  on  a  promissory  note  for  $600,  made  by  the 
defendant,  dated  July  4,  1857,  and  payable  in  one  year  after  date  to 
the  order  of  one  Joseph  Lambrite  and  by  him  indorsed.  The  de- 
fendant in  his  answer  denied  the  making  and  indorsement  of  the 
note  declared  on;  but  admitted  that  he  signed  such  a  note;  and 
averred  that  he  put  it  into  the  hands  of  third  parties  to  be  delivered 
to  Lambrite,  on  the  happening  of  contingencies  which  never  did 
happen;  and  that  neither  the  defendant  nor  those  parties,  nor  any 
one  else,  by  his  authority  or  consent,  ever  delivered  the  writing  to 
Lambrite,  or  to  any  other  person  as  the  defendant's  promissory  note. 

At  the  trial  in  the  Superior  Court,  the  plaintiff  proved  the  signa- 
tures of  the  maker  and  indorser;  and  there  was  evidence  that,  on 
the  16th  of  July,  1857,  the  note  was  in  Lambrite's  possession  and  was 
indorsed  and  delivered  by  him  to  the  plaintiff  as  collateral  securitv 
for  the  pa}Tnent  in  six  months  of  $2000,  of  which  $900  was  still  due 
from  Lambrite  to  the  plaintiff  at  the  time  of  the  trial,  and  that  the 
plaintiff  took  the  note  without  any  knowledge  of  the  circumstances 
under  which  it  was  given. 

EocKWELL,  J.,  allowed  the  defendant  to  introduce  evidence  of  the 
facts  alleged  in  his  answer,  against  the  objection  of  the  plaintiff  that 
they  would  constitute  no  defence  to  the  action  unless  proved  to  have 

1  See  Scholfield  v.  Earl  of  Londesborough,  1896,  A.  C.  514,  post,  p.  449. 


FEARING   V.   CLARK.  29 

been  known  to  the  plaintiff  when  he  took  the  note;  and  instructed 
the  jury,  "  that  if  they  should  find  that  the  writing  copied  in  the 
declaration  was  never  delivered  by  the  defendant,  or  any  person 
authorized  by  him  so  to  deliver  it,  to  the  payee,  or  to  any  person 
for  his  use,  but  that  he  obtained  possession  of  it  without  the  assent  or 
knowledge  of  or  authority  from  the  defendant,  and,  having  obtained 
such  possession  without  right  or  authority,  put  his  name  upon  the 
back  of  it,  and  delivered  it  to  the  plaintiff,  then  and  in  that  case  it 
never  became  the  negotiable  note  of  the  defendant,  and  the  defendant 
was  entitled  to  their  verdict."  The  jury  returned  a  verdict  for  the 
defendant,  and  the  plaintiff  alleged  exceptions. 

[Argument  not  reported.] 

BiGELOW,  C.  J.  The  defendant  proved  no  facts  at  the  trial  which 
constituted  a  valid  defence  to  the  note  declared  on  as  against  the 
plaintiff,  who  is  a  hona  fide  holder  for  value  without  notice.  The 
rule  is  well  settled,  that  when  a  note  is  transferred  by  a  party  to 
whom  it  is  intrusted  without  authority  or  fraudulently,  it  will  be 
valid  as  against  the  maker  in  the  hands  of  a  holder  who  takes  it 
bona  fide  without  notice  of  the  special  circumstances  under  which 
the  note  came  into  the  possession  of  the  payee  or  agent  of  the  maker, 
who  puts  it  in  circulation.  In  such  case,  the  maker  or  indorser  who 
places  it  in  the  hands  of  another,  for  the  purpose  of  being  used  in 
a  particular  way  or  for  a  special  object,  takes  the  risk  of  its  being 
used  in  a  different  way,  and  cannot  refuse  to  pay  it  to  any  hona  fide 
holder  into  whose  hands  it  may  come.  Chit.  Bills  (10th  ed.),  198; 
Sweetser  v.  French,  2  Cush.  309.  It  is  undoubtedly  true  that,  as 
between  the  original  parties  to  a  note  or  those  who  take  it  with 
notice,  it  is  essential  that  there  should  have  been  a  delivery  of  the 
note  by  the  maker  to  take  effect  as  a  contract.  In  this  sense,  delivery 
is  included  in  the  allegation  of  making.  But  the  rule  is  qualified 
and  limited  as  between  the  maker  and  a  hona  fide  holder.  In  such 
case,  a  valid  delivery  can  be  made  by  any  person  to  whom  the  maker 
has  given  the  note  in  such  form  as  to  enable  him  to  hold  himself 
out  as  absolute  owner  of  the  note.  The  case  of  Putnam  v.  Sullivan,^ 
4  Mass.  45,  is  a  strong  one  on  this  point.  There  the  notes  were 
delivered  to  a  clerk  to  be  used  for  special  purposes  only,  and  it  was 
held  that  a  delivery  by  the  clerk,  whether  through  deception  practised 
on  him,  or  a  voluntary  violation  of  the  trust  reposed  in  him,  must 
be  deemed  in  law,  as  against  a  hona  fide  holder,  a  delivery  by  those 
who  are  liable  on  the  notes.  The  rule  is  different  in  regard  to  a 
deed,  bond  or  other  instrument  placed  in  the  hands  of  a  third  person 
as  an  escrow,  to  be  delivered  on  the  happening  of  a  future  event  or 
contingency.    In  that  case,  no  title  or  interest  passes  until  a  delivery 

1  Post,  p.  404. 


30  DELIVERY. 

is  made  in  pursuance  of  the  terms  and  conditions  upon  which  it  was 
placed  in  the  hands  of  the  party  to  whom  it  was  intrusted.  But 
the  law  aims  to  secure  the  free  and  unrestrained  circulation  of  ne- 
gotiable paper,  and  to  protect  the  rights  of  persons  taking  it  bona  fide 
without  notice.  It  therefore  makes  the  consequences,  which  follow 
from  the  negotiation  of  promissory  notes  and  bills  of  exchange 
through  the  fraud,  deception  or  mistake  of  those  persons  to  whom 
they  are  intrusted  by  the  makers,  to  fall  on  those  who  enabled  them 
to  hold  themselves  out  as  owners  of  the  paper  jure  dlsponendi,  and 
not  on  innocent  holders  who  have  taken  it  for  value  without  notice. 

Exceptions  sustained. 

NoTK.  — Tt  is  to  be  observed  that,  while  the  facts  in  this  case  make  a  case 
of  agency,  and  that  the  person  to  whom  the  instrnnieut  was  transferred  by 
the  maker  was  more  than  a  custodian,  the  language  of  the  court  is  not  con- 
fined to  agency  in  the  common-law  sense.  This  is  sound  theory;  common-law 
rules  are  not  the  test,  and  another  reason  exists  for  liability,  i.  e.  the  mer- 
chants' reason,  —  "  protection  of  the  ^o/ia  ^V/e  holder  "  See  Bigelow,  Bills 
and  Notes,  14. 

It  has  been  said,  however,  that  delivery  by  a  custodian,  that  is,  by  one 
whose  duty  was  merely  to  keep  the  instrument,  could  not  bind  the  promisor. 
Chipman  v.  Tucker,  38  Wis.  43. 


GIDDINGS  V.  GIDDINGS'S  ADM'E. 

Supreme  Court  of  Vermont,  October,  1S78.     51  Yt.  227. 

There  may  be  a  transfer  upon  some  condition  which  requires  fulfillment  in  order  to 
give  the  transferee  full  power.^  whether  the  transfer  be  to  a  third  person. 

This  was  an  appeal  from  probate.  The  case  was  sent  to  a  referee 
who  reported  the  facts,  and  judgment  was  entered  for  the  plaintiff 
for  one-third  of  the  sum  of  $375.20  with  interest;  to  which  both 
parties  excepted.  The  facts  appear  sufficiently  in  the  opinion  of 
the  court. 

[Argument  reported.] 

RoYCE,  J.  .  .  .  The  first  question  in  the  consideration  of  the  case, 
and  the  most  important  in  the  view  we  take  of  it,  is  as  to  the  de- 
livery of  the  note  in  suit.  Benjamin  Giddings,  defendant's  intestate, 
and  his  brother  Joseph,  met  in  1867,  and  in  conversation  Benjamin 
admitted  that  he  considered  he  ought  to  make  good  to  Joseph,  or 
to  those  who  would  have  his  estate,  his  (Joseph's)  share  in  their 
mother's  dower  estate,  which  had  never  been  claimed  hy  Joseph,  and 
on  which  the  Statute  of  Limitations  had  then  run,  and  which  th) 

1  N.  I.  L.  §  33. 


GIDDINGS   V.    GIDDINGS'S   ADM'r.  31 

referee  finds  was  worth,  on  the  first  of  January,  1866,  "as  near  as 
can  now  be  ascertained,"  $375.20.  In  consideration  of  tliis,  and 
certain  good  but  not  valuable  considerations,  Benjamin  afterwards 
executed  three  promissory  notes  in  writing  for  the  sum  of  $500  each, 
payable  one  to  each  of  Joseph's  three  sons  respectively,  one  year 
after  the  maker's  death,  one  of  which  notes  is  declared  upon  as  the 
cause  of  action  in  this  suit.  He  intended,  as  the  referee  finds,  to 
leave  these  notes  in  the  hands  of  some  third  person,  subject  to  his 
own  control,  to  be  delivered  after  his  death,  if  he  should  not  retake 
them  or  direct  otherwise.  He  informed  Joseph  and  each  of  the 
payees  of  his  intention,  as  above,  and  they  all  assented  to  the  arrange- 
ment. After  that  he  put  the  notes  into  a  letter  envelope  and  sealed 
it  up,  and  wrote  on  it  this  address :  "  Henry  F.  Giddings,  of  Ellis- 
burg,  Jefferson  County,  N".  Y.,  and  others,  in  care  of  Barnes  Frisbie, 
Esq.,  of  Poultney,"  and  delivered  it  to  Barnes  Frisbie  of  Poultney, 
at  Poultney,  with  directions  about  the  custody  of  it,  which  Frisbie, 
as  the  referee  finds,  indorsed  correctly,  in  substance,  on  a  wrapper  that 
he  put  around  it,  in  these  words :  "  Letter  left  in  my  care  by  Benj. 
Giddings,  to  be  handed  to  Mr.  Giddings  if  he  calls  for  it;  other- 
wise not  to  be  opened  in  his  lifetime."  Benjamin  did  not  retake 
the  package;  and  after  his  death  in  1873,  Frisbie  opened  it,  and 
delivered  the  notes  respectively  to  the  payees  named  in  them,  —  this 
plaintiff  and  Henry  F.  and  Benjamin  F.  Giddings,  his  brother. 

In  Belden  v.  Carter,  4  Day,  66,  A,  having  signed,  sealed,  and 
acknowledged  a  deed  of  certain  lands  to  B,  gave  the  deed,  in  the 
absence  of  B,  to  C,  saying :  "  Take  this  deed  and  keep  it ;  if  I  never 
call  for  it,  deliver  it  to  B  after  my  death;  if  I  call  for  it,  deliver 
it  up  to  me."  A  died  without  retaking  the  deed,  and  C  delivered 
it  to  B.  Held,  that  the  delivery  became  complete  and  took  relation 
back  to  the  first  delivery.  In  Worth  v.  Case,  42  IST.  Y.  362,  a  note 
remained  in  the  hands  of  the  payee  until  the  death  of  the  maker, 
being  received  and  held  by  him  subject  to  the  condition  that  it  should 
be  returned  to  the  maker  whenever  he  might  wish  it  during  his  life- 
time; and  the  note  was  held  valid.  And  in  Foster  v.  Mansfield, 
3  Met.  412,  it  is  laid  down  that  if  a  grantor  directs  and  intends  that 
his  deed  from  and  after  its  execution  shall  be  retained  by  the  scriv- 
ener until  after  the  grantor's  death  and  then  delivered  to  the  grantee, 
all  of  which  if  afterwards  done,  the  estate  vests  in  the  grantee  from 
the  time  of  the  execution  of  the  deed.  On  the  authority  of  these 
cases,  and  the  principles  of  law  upon  which  they  were  decided,  it 
seems  clear  that  had  Benjamin  handed  the  notes  to  Frisbie  with 
specific  instructions,  as  in  Belden  v.  Carter,  supra,  the  delivery  would 
have  been  sufficient,  and  on  the  death  of  the  maker,  with  the  option 
of  recall  unexercised,  and  the  actual  receipt  of  the  notes  by  the  payees, 
would  have  become  complete  and  taken  effect  back  by  relation  to  the 
time  of  the  deposit  of  the  notes  with  Frisbie.     Were  the  acts  and 


32  DELIVERY. 

words  of  Benjamin  and  the  understanding  and  treatment  thereof  by 
all  the  parties,  as  shown  by  the  referee's  findings,  equivalent  to  such 
a  specific  direction? 

Upon  the  part  of  the  defendant  it  is  contended  that  the  acts  of  the 
maker  simply  constituted  Frisbie  a  depositary  of  the  notes  for  him, 
with  no  authority  to  deliver  them  to  the  payees  in  any  event;  and 
that  whatever  agency  he  might  have  been  invested  with  to  deliver 
them  upon  further  instructions  was  revoked  by  the  death  of  Ben- 
jamin. In  order  to  accept  this  construction,  it  is  necessary  to  reject 
as  meaningless  the  direction  written  by  Benjamin  upon  the  envelope 
containing  the  notes,  and  to  declare  unjustifiable  the  acts  of  Frisbie 
based  upon  his  understanding  of  the  meaning  of  that  direction.  The 
policy  of  the  law  is  to  give  effect  to  all  the  acts  and  words  of  parties, 
when  it  can  be  done  without  repugnancy. 

In  the  case  at  bar  the  payees  of  the  three  notes  in  terms  assented 
to  their  delivery  to  some  third  person  by  the  maker,  who  should  hold 
them  subject  to  an  option  of  recall  by  the  maker  during  his  life,  and 
then  complete  the  delivery  by  handing  them  over  to  the  payees ;  also 
that  the  selection  of  such  third  person  should  be  left  to  the  maker. 
In  pursuance  of  this  arrangement  Benjamin  selected  Frisbie  as  such 
third  person,  and  handed  the  notes  over  to  him  with  oral  directions 
concerning  the  option  of  recall,  and  written  directions,  in  tlie  form 
of  an  address  upon  the  envelope,  in  precisely  the  terms  ordinarily 
used  in  delivering  papers  or  goods  through  the  agency  of  a  carrier, 
for  their  delivery  to  the  payees,  in  case  he  should  die  with  the  option 
of  recall  unexercised.  From  this  direction  Frisbie,  as  evinced  by  his 
acts,  understood,  as  any  intelligent  person  would  have  done,  that  if 
Giddings  died  without  reclaiming  the  packet,  he  was  to  deliver  it  — 
not  to  Giddings's  personal  representatives,  in  the  absence  of  any  in- 
structions written  or  oral  to  that  effect  —  but  to  the  parties  to  whom 
it  was  so  addressed,  viz.,  "  Henry  F.  Giddings  and  others."  Benjamin 
did  die  without  calling  for  the  packet,  and  thereupon  Frisbie,  for  the 
purpose  of  ascertaining  who  were  meant  by  the  word  "  others,"  as- 
sumed to  open  it,  and  delivered  the  notes  to  the  several  payees  named 
therein.  Ilad  Frisbie  been  on  the  eve  of  a  journey  to  Ellisburg,  and 
had  Benjamin  handed  him  this  packet  without  a  word,  the  legal  con- 
struction of  the  act  would  have  been :  "  Deliver  this  package  to  the 
parties  to  whom  it  is  addressed  unless  I  exercise  the  right  I  possess 
by  implication  to  direct  you  otherwise  before  the  commission  is  ex- 
ecuted." In  this  case,  the  right  to  countermand  the  direction  upon 
the  envelope  was  extended  by  oral  reservation  to  cover  the  whole 
period  of  Benjamin's  life;  but  the  principle  remains  the  same,  and 
the  delivery,  having  been  completed,  will  not  be  disturbed.  There 
was  a  perfect  consonance  in  the  proved  intentions  of  the  parties  and 
the  maimer  in  which  they  were  carried  out.     The  precise  intention 


GIDDINGS   V.   GIDDINGS'S   ADM'r.  33^' 

of  Benjamin  with  regard  to  the  notes,  as  found  to  have  been  expressed 
by  him  to  his  brother  and  three  nephews,  was  gathered  by  Frisbie 
from  the  oral  and  written  directions  of  Benjamin  to  him,  and  from 
no  other  source,  and  carried  out  by  him  to  the  letter.  We  find  in  this 
whole  transaction  all  the  elements  which  in  law  are  held  to  constitute 
a  valid  delivery  through  an  agent,  —  that  Frisbie  received  the  note 
in  suit  as  agent  for  the  payee,  subject  to  an  option  of  recall  by  the 
maker,  in  like  manner  as  a  carrier  receives  goods  as  the  agent  of  the 
consignee,  subject  to  the  option  of  the  consignor  to  stop  them  in 
transitu,  held  it  as  trustee  for  the  payee,  and,  having  completed  the 
delivery  in  accordance  with  the  direction  upon  the  envelope  and 
the  intention  of  all  the  parties,  it  took  effect  back  by  relation  to  the 
original  deposit  with  him,  and  constituted  a  full  and  complete  de- 
livery on  that  date. 

The  defendant  seeks  to  avoid  the  note  upon  the  further  ground  of 
want  or  inadequacy  of  consideration.  The  case  shows  that  Joseph 
original^  had  a  legally  enforceable  claim  for  his  distributive  share 
in  his  mother's  dower  estate,  that  said  claim  was  never  presented  nor 
enforced  by  him,  and  that  the  interest  was  possessed  and  enjoyed 
with  his  tacit  consent  and  permission,  by  Benjamin.  "  The  defend- 
ant's having  received  a  benefit  by  the  permission  of  the  plaintiff,  is 
a  good  consideration."  Davis  v.  Morgan,  6  D.  &  E.  42 ;  4  B.  &  C.  8. 
So  also  is  an  outlawed  legal  claim.  Hawley  v.  Farrar,  1  Vt.  420; 
Eastwood  V.  Kenyon,  11 'Ad.  &  E.  438;  Lee  v.  Muggridge,  5  Taunt. 
37 ;  Smith  v.  Jameson,  5  T.  E.  601 ;  Esp.  N.  P.  116 ;  Bull.  N".  P.  147 ; 
Barlow  v.  Smith,  4  Vt.  139,  144;  Glass  v.  Beach,  5  Vt.  172 ;  Boothe 
V.  Fitzpatrick,  36  Vt.  681.  That  the  consideration  for  the  note  was 
a  certain  specific  outlawed  claim,  and  less  in  amount  than  the  face 
of  the  note,  is  immaterial  in  the  absence  of  fraud  or  mistake  upon 
the  part  of  either  of  the  contracting  parties.  In  Oakley  v.  Boorman, 
it  is  said :  "  A  promise  or  obligation  cannot  be  defeated  in  whole  or 
in  part,  on  the  ground  of  the  inadequacy  of  the  compensation  received 
for  the  obligation  incurred  —  the  slightest  consideration  is  sufficient 
to  support  the  most  onerous  obligation ;  the  meaning  of  the  rule  that 
you  may  impeach  the  consideration  is  only  that  you  may  show  fraud, 
mistake,  or  illegality  in  its  concoction,  or  non-performance  of  the 
stipulations  of  the  agreement  on  the  part  of  the  promisee."  21  Wend. 
588.  Contracts  entered  into  by  parties  knowing  their  rights,  though 
upon  inadequate  consideration,  will  not  be  set  aside  in  law.  Har- 
rington V.  Wells,  12  Vt.  505;  Paige  v.  Eipley,  12  Vt.  289;  nor  in 
equity,  Stephens  v.  Bateman,  1  Bro.  C.  C.  22 ;  Griffith  v.  Spratley, 
1  Cox,  383;  Collin  v.  Brown,  1  Cox,  428.  Family  agreements  are 
especially  favored  in  this  respect.  Stockley  v.  Stockley,  1  Ves.  &  B. 
23 ;  being  based  upon  good  as  well  as  valuable  considerations.  Persse 
V.  Persse,  7  CI.  &  F.  279 ;  1  West,  110. 

The  defendant  claims  that  if  any  recovery  can  be  had  in  this 

3 


34  DELIVERY. 

action,  it  should  be  only  for  the  amount  found  by  the  referee  to  be 
the  actual  value  at  the  time  the  note  was  given,  of  one  third  of 
Joseph's  share  of  the  dower  interest.  It  seems  to  be  well  settled  that 
to  entitle  a  defendant  to  an  abatement  from  the  sum  for  which  the 
note  was  given,  in  a  case  of  this  kind,  two  things  at  least  must  con- 
cur, viz.,  fraud  upon  the  defendant  in  procuring  the  note  for  the  sum 
named,  or,  at  least,  a  failure  of  the  consideration  from  the  under- 
standing of  the  parties  at  the  time,  and  an  ability  by  computation  to 
Jix  the  amount  to  be  deducted.  Walker  v.  Smith,  2  Vt.  539 ;  Stone 
V.  Peake,  16  Vt.  213;  Harrington  v.  Wells,  12  Vt.  505;  Harrington 
V.  Lee,  33  Vt.  249,  Both  of  these  elements  are  lacking  in  the  case  at 
bar.  No  fraud  is  alleged  and  no  misunderstanding  about  or  failure 
in  the  consideration.  And  it  is  not  found  with  certainty  what  the 
actual  value  of  Joseph's  share  in  the  dower  estate  was  at  the  time 
the  notes  were  given ;  nor  is  it  found  affirmatively  that  in  the  settle- 
ment the  fifty  years'  use  and  the  purchase-money  of  Joseph's  dis- 
tributive share  of  the  farm,  for  which  Joseph  once  had  a  legal  claim 
against  the  estate  of  his  father,  and  which  inured,  at  least  partially, 
to  the  benefit  of  Benjamin,  were  not  taken  into  consideration  as 
forming  a  part  of  the  consideration  of  the  notes.  Upon  such  facts 
as  these  it  would  be  extremely  hazardous,  to  say  the  least,  to  under- 
take to  reduce  written  contracts  or  promises  to  a  quantum  valebat. 

Judgment  reversed,  and  judgment  for  plaintiff  on  the  report  for 
the  larger  sum  named,  with  interest  and  costs;  to  be  certified  to  the 
Probate  Court. 


BUEKE   V.    DULANEY. 

Supreme  Court  of  the  United  States,  April,  1899.     153  U.  S.  228. 
Or  to  the  other  party  to  the  instrument. 

Action  by  the  testator  of  the  appellees,  upon  a  writing  purporting 
to  be  the  promissory  note  of  the  appellant  for  $4308.80,  dated  Aug. 
10,  1883,  and  payable  one  year  after  date,  for  value  received. 

The  defendant  below,  Burke,  denied  his  liability  on  the  note  and 
offered  to  prove  that  the  note  was  given  to  the  testator  of  the  ap- 
pellees for  an  interest  in  certain  mines,  and  that  at  the  time  of  giving 
the  note,  it  was  orally  agreed  that  the  note  was  delivered  upon  con- 
dition that  if  the  maker,  Burke,  was  not  satisfied  after  an  inspection 
of  the  mining  property  mentioned,  the  payee,  Dulaney,  would  de- 
liver back  the  note ;  that  he,  Burke,  demanded  the  note,  after  inspect- 
ing the  property,  and  offered  to  Dulaney  a  deed  of  the  interest. 

Tnis  evidence  was  objected  to  by  the  plaintiffs  belpw  and  was  ex- 
cluded by  the  court,  and  the  defendant  below  excepted. 

[Argument  reported.] 


BURKE  V.   DULANEY.  35 

Mr.  Justice  Harlan,  The  general  rule  that  a  written  contract 
cannot  be  contradicted  or  varied  by  evidence  of  an  oral  agreement 
between  the  parties  before  or  at  the  time  of  such  contract,  has  been 
often  recognized  and  applied  by  this  court,  especially  in  cases  in 
which  it  was  sought  to  deprive  bona  fide  holders  of  or  parties  to 
negotiable  securities,  of  the  rights  to  which  they  were  entitled  ac- 
cording to  the  legal  import  of  the  terms  of  such  instruments.  Eenner 
V.  Bank  of  Columbia,  9  Wheat.  576,  587 ;  Brown  v.  Wiley,  20  How. 
U2 ;  Specht  v.  Howard,  16  Wall.  564;  Forsythe  v.  Kimball,  91  U.  S. 
291;  Brown  v.  Spofford,  95  U.  S.  474;  Martin  v.  Cole,  104  U.  S.  30; 
Burnes  v.  Scott,  117  U.  S.  582;  Falk  v.  Moebs,  127  U.  S.  597. 

Several  of  these  cases  were  cited  in  the  opinion  of  the  court  below, 
and  have  been  cited  here,  as  supporting  the  exclusion  of  the  evidence 
which  the  appellant  offered  to  introduce.  23  Pac.  Eep.  915.  It  is 
supposed  that  Burnes  v.  Scott  is  particularly  in  point  for  the  ap- 
pellees. That  was  an  action  by  the  indorsee  of  a  negotiable  note 
against  the  maker.  The  defendant  in  that  case  offered  to  prove  that 
the  note  was  not  intended  by  him  or  by  the  payee  as  a  promissory 
note,  but  was  given  to  and  was  received  by  the  payee  as  a  mere  memo- 
randum of  the  estimated  value  of  the  payee's  interest  in  certain  rail- 
road bonds  placed  in  the  hands  of  the  maker,  and  which  were  to  be 
accounted  for  in  the  settlement  of  certain  partnership  affairs  in  which 
the  maker  and  payee  were  interested ;  and  that  upon  such  settlement 
it  would  appear  that  the  payee  had  received,  prior  to  the  giving  of  the 
note,  more  than  his  proper  share  of  the  partnership  assets,  and,  there- 
fore, was  not  entitled  to  claim  anything  in  virtue  of  such  memoran- 
dum. This  court  held  the  evidence  inadmissible  upon  the  ground 
that,  by  an  alleged  contemporaneous  verbal  agreement,  it  varied  and 
contradicted  the  written  contract  of  the  parties.  If  that  action  had 
been  brought  by  the  original  payee  against  the  maker,  and  if  the 
evidence  above  referred  to  had  been  excluded,  a  different  question 
would  have  been  presented.  But,  as  we  have  seen,  the  issue  in  Burnes 
V.  Scott  was  between  the  indorsee  of  a  negotiable  note  and  the  maker. 
The  rule  is  settled  that  a  negotiable  instrument  in  the  hands  of  an 
innocent  holder  for  value  cannot  be  contradicted,  to  his  prejudice, 
by  evidence  of  an  oral  agreement  or  understanding  between  the  origi- 
nal parties  variant  from  the  terms  of  their  written  contract. 

The  authorities  cited  do  not  determine  the  present  case.  The  issue 
here  is  between  the  original  parties  to  the  note.  And  the  evidence 
offered  by  the  appellant,  and  excluded  by  the  court,  did  not  in  any 
true  sense  contradict  the  terms  of  the  writing  in  suit,  nor  vary  their 
legal  import,  but  tended  to  show  that  the  written  instrument  was 
never,  in  fact,  delivered  as  a  present  contract,  unconditionally  bind- 
ing upon  the  obligor  according  to  its  terms  from  the  time  of  such 
delivery,  but  was  left  in  the  hands  of  Dulaney,  to  become  an  absolute 
obligation  of  the  maker  in  the  event  of  his  electing,  upon  examination 


36  DELIVERY. 

or  investigation,  to  take  the  stipulated  interest  in  the  property  in 
question.  In  other  words,  according  to  the  evidence  offered  and  ex- 
cluded, the  written  instrument,  upon  which  this  suit  is  based,  was 
not  —  except  in  a  named  contingency  —  to  become  a  contract,  or  a 
promissory  note  which  the  payee  could  at  any  time  rightfully  trans- 
fer. Evidence  of  such  an  oral  agreement  would  show  that  the  con- 
tingency never  happened,  and  would  not  be  in  contradiction  of  the 
writing.  It  would  prove  that  there  never  was  any  concluded,  bind- 
ing contract  entitling  the  party  who  claimed  the  benefit  of  it  to  en- 
force its  stipulations.  The  exclusion  of  parol  evidence  of  such  an 
agreement  could  be  justified  only  upon  the  ground  that  the  mere 
possession  of  a  written  instrument,  in  form  a  promissory  note,  by  the 
person  named  in  it  as  payee,  is  conclusive  of  his  right  to  hold  it  as 
the  absolute  obligation  of  the  maker.  While  such  possession  is,  un- 
doubtedly, prima  facie,  [and]  indeed,  should  be  deemed  strong,  evi- 
dence that  the  instrument  came  to  the  hands  of  the  payee  as  an 
obligation  of  the  maker,  enforceable  according  to  its  legal  import,  it 
is  open  to  the  latter  to  prove  the  circumstances  under  which  possession 
was  acquired,  and  to  show  that  there  never  was  any  complete,  final 
delivery  of  the  writing  as  the  promissory  note  of  the  maker,  payable 
at  all  events  and  aceording  to  its  terms.  The  rule  that  excludes  parol 
evidence  in  contradiction  of  a  written  agreement  presupposes  the 
existence  imfactof -such  agreement  at  the  time  suit  is  brought.  But 
the  rule  has  no  application  if  the  writing  was  not  delivered  as  a 
present  contract.  i 

The  same  doctrine  was  announced  in  McFarland  v.  Sikes,  54 
Conn.  250,  251,  252.  That  was  an  action  upon  a  note,  which,  the 
defendant  alleged,  had  been  executed  and  delivered  to  the  plaintiff 
upon  an  agreement  that  it  should  be  cancelled  under  certain  named 
circumstances,  and  in  the  event  he  demanded,  by  a  named  day,  that 
it  be  returned  to  him.  The  trial  court  having  ruled  that  the  facts 
relied  upon  by  the  defendant  did  not  constitute  a  defence,  the  Su- 
preme Court  of  Errors  of  Connecticut,  reversing  the  judgment,  said : 
"  The  error  was  in  applying  to  the  case  the  familiar  and  well-estab- 
lished rule  that  parol  evidence  is  inadmissible  to  contradict  or  vary 
a  written  contract.  A  written  contract  must  be  in  force  as  a  binding 
obligation  to  make  it  subject  to  this  rule.  Such  a  contract  cannot 
become  a  binding  obligation  until  it  has  been  delivered.  Its  de- 
livery may  be  absolute  or  conditional.  If  thje  latter,  then  it  does  not 
become  a  binding  obligation  until  the  condition  upon  which  its 
delivery  depends  has  been  fulfilled.  If  the  paj'-ee  of  a  note  has  it  in 
his  possession,  that  fact  would  be  prima  facie  evidence  that  it  had 
been  delivered ;  but  it  would  be  only  prima  facie  evidence.  The  fact 
could  be  shovra  to  be  otherwise  and  by  parol  evidence.  Such  parol 
evidence  does  not  contradict  the  note  or  seek  to  vary  its  terms.    It 


BURKP     '.   DULANEY.  37 

merely  goes  to  the  point  of  its  non-delivery.  The  note  in  its  terms 
is  precisely  what  both  the  maker  and  the  payee  intended  it  to  be.  No 
one  desires  to  vary  its  terms  or  to  contradict  them." 

For  the  reasons  stated,  and  without  considering  the  case  in  other 
respects,  we  are  of  opinion  that  it  was  error  to  exclude  the  evidence 
offered  by  the  defendant  tending  to  show  that  the  writing  sued  on 
was  not  delivered  to  or  received  by  Dulaney  as  the  promissory  note  of 
the  defendant,  binding  upon  him  as  a  present  obligation,  enforceable 
according  to  its  terms,  but  was  delivered  to  become  an  obligation  of 
that  character  when,  but  not  before,  the  defendant  examined  and, 
by  working  them,  tested  the  mining  properties  purchased  by  the 
plaintiff,  and  elected  to  take  the  stipulated  interest  in  them.  Ac- 
cording to  the  evidence  so  offered  and  excluded  the  writing  in  ques- 
tion never  became,  as  between  Burke  and  Dulaney,  the  absolute 
obligation  of  the  former,  but  was  delivered  and  accepted  only  as  a 
memorandum  of  what  Burke  was  to  pay  in  the  event  of  his  electing 
to  become  interested  in  the  property,  and  from  the  time  he  so  elected, 
or  could  be  deemed  to  have  so  elected,  it  was  to  take  effect  as  his 
promissory  note,  payable  according  to  its  terms.  His  election,  within 
a  reasonable  time,  to  take  such  interest,  was  made  a  condition  pre- 
cedent to  his  liability  to  pay  the  stipulated  price.  The  minds  of  the 
parties  never  met  upon  any  other  basis,  and  a  refusal  to  give  effect 
to  their  oral  agreement  would  make  for  them  a  contract  which  they 
did  not  choose  to  make  for  themselves. 

The  judgment  is  reversed  and  the  cause  is  remanded,  that  a  new 
trial  may  be  ordered,  and  further  proceedings  had  in  conformity  with 
this  opinion. 

Note.  —  There  is  not  entire  unanimity  in  the  decisions  upon  the  question 
wliether  there  can  be  a  conditional  delivery  to  the  payee.  In  Gardner  v. 
Fite,  93  Ala.  405,  9  So.  R.  367,  it  was  said  by  Walker,  J.  -.  "  It  is  not  com- 
petent to  prove  that  a  bill  or  note  was  delivered  to  the  promisee  as  an  escrow, 
for  the  evidence  would  be  repugnant  to  the  act.  Massmann  v.  Holscher,  49 
Mo.  87;  Jones  v.  Shaw,  67  Mo.  667;  .  .  .  Hargrave  v.  Melbourne,  86  Ala. 
270;  1  Daniel,  Neg.  Inst.  §  68;  ...  As  the  notes  themselves  expressed  no 
conditions  limiting  their  operation,  they  were  legally  incapable  of  explana- 
tion, contradiction,  or  modification  by  parol  evidence.  Day  v.  Thompson, 
65  Ala.  269."  But  the  weight  of  authority  is  against  this  view.  See  Ben- 
ton V.  Martin,  52  N.  Y.  570;  Clanin  v.  Esterly  Co.,  118  Ind.  372;  and  Wilson 
r.  Powers,  131  Mass.  539.  If  it  is  admitted  that  the  parol  evidence  rule  is 
applicable  to  commercial  paper,  it  is  no  obstacle  in  such  a  case.  To  make  a 
binding  obligation,  there  must  exist  the  written  contract  and  a  delivery  there- 
of ;  the  parol  evidence  rule  applies  only  to  the  former. 

If  the  question  were  referred  to  the  custom  of  merchants,  there  can  be  no 
doubt  as  to  the  reply. 


38  DELIVERY. 


WOOD'S    SONS    CO.   V.    SCHAEFEE. 

Supreme  Court  of  Massachusetts,  March,  1899.     173  Mass.  443  ;  53  N.  E. 

Rep.  881. 

But  not  if  the  condition  negatives  possible  liability. 

Contract,  upon  a  promissory  note  for  $2,500,  dated  June  19, 
1896,  payable  four  months  after  date  to  the  plaintiff,  or  order,  and 
signed  by  the  defendant.  At  the  trial  in  the  Superior  Court,  before 
Braley,  J.,  the  jury  returned  a  verdict  for  the  plaintiff;  and  the 
defendant  alleged  exceptions.    The  facts  appear  in  the  opinion. 

[Argument  not  reported.] 

Holmes,  J.  This  is  an  action  upon  a  promissory  note.  The  de- 
fence is  a  denial  that  the  transaction  was  what  it  appeared  to  be  on 
the  face  of  the  papers.  There  is  also  a  claim  in  set-off  for  services 
as  president  of  the  plaintiff  corporation.  At  the  trial,  the  plaintiff's 
evidence  was  that  the  plaintiff  discounted  for  the  defendant  a  note,  of 
which  the  note  in  suit  is  a  renewal,  giving  a  cheque  for  fifty  dollars 
less  than  the  note  and  receiving  twenty-five  shares  of  the  Corson  Coal 
Company  as  collateral  security  as  soon  as  the  defendant  was  able  to 
release  them  from  a  previous  pledge  by  the  money  thus  obtained. 
The  note  and  the  certificate  indorsed  in  blank  by  the  defendant  were 
produced,  and  the  execution  of  the  instrument  was  not  denied.  The 
defendant  testified  that,  in  view  of  services  which  he  had  rendered  to 
the  plaintiff,  Edmund  M.  Wood,  its  treasurer  and  manager,  agreed 
to  buy  the  twenty-five  shares  of  him,  and  gave  him  the  cheque  as 
payment  for  them,  and  that  the  defendant,  to  enable  Wood  "  to  square 
himself  with  his  own  corporation,"  from  which  the  money  came,  gave 
Wood  "  the  use  of  "  the  original  of  the  note  in  suit  with  the  shares 
as  collateral  security.  Wood  promising  to  take  care  of  it  when  it 
should  fall  due.  The  judge  left  it  to  the  jury  to  say  whether  the 
defendant's  story  was  true,  and  instructed  them  to  find  for  him  if 
they  accepted  it.    They  found  for  the  plaintiff. 

It  would  be  hard  to  say  that  the  course  adopted  did  not  save  all 
the  defendant's  rights  if  the  alleged  agreement  had  been  proved,  al- 
though the  instructions  were  not  so  specific  as  those  asked.  It  really 
gave  the  defendant  quite  as  good  a  chance  to  prevail  upon  his  im- 
probable story.  But  it  is  plain,  further,  that  even  on  the  defendant's 
account  Wood's  agreement  was  collateral  and  personal.  The  de- 
fendant's note  was  to  be  given  to  the  company  in  order  to  justify 
Wood's  draft  upon  it  to  pay  for  the  shares.  If  the  defendant  did  not 
contemplate  a  fraud  on  the  company,  the  company  was  entitled  to 
enforce  the  note,  although  Wood  promised  .on  his  own  behalf  that  he 
would  forestall  its  doing  so  by  paying  it.    Finally,  if  the  defendant's 


wood's   sons   CO.   V.   SCHAEFER.  39 

counsel,  contrary  to  the  plain  meaning  of  the  defendant's  evidence, 
wanted  to  contend  that  Wood's  agreement  was  an  agreement  by  the 
company  not  to  enforce  the  note  according  to  its  tenor,  such  an  agree- 
ment made  at  the  time  the  note  was  delivered  is  in  flat  contradiction 
of  the  instrument,  and  cannot  be  proved.  Perry  v.  Bigelow,  128 
Mass.  19 ;  Hall  v.  First  National  Bank  of  Chelsea,  173  Mass.  16. 
[A  question  of  set-off.] 

Exceptions  overruled. 

Note.  —  Following  up  the  principle  of  delivery  upon  condition  to  the 
other  party  to  the  instrument,  it  has  been  held  that  it  may  be  shown  that 
the  transferor,  in  delivering  the  instrument  to  the  transferee,  did  so  upon  the 
condition  that  no  liability  was  to  be  incurred  thereon.  Thus  in  Higgins  v. 
Ridgway,  153  N.  Y.  130,  which  was  an  action  by  the  receiver  of  the  North 
River  Bank,  upon  a  promissory  note,  made  by  the  defendant  payable  to  his 
own  order,  and  indorsed  by  him  to  the  bank,  the  defendant  proved  that  he 
made  and  indorsed  the  note  for  the  accommodation  of  the  bank,  upon  the 
condition  that  he  was  to  incur  no  liability  upon  it.  It  was  held  "  that  the  de- 
livery of  the  note  in  suit  .  .  .  was  conditional  and  was  for  the  accommoda- 
tion and  to  serve  some  particular  purpose  of  the  bank."  The  evidence  of  the 
defendant  in  this  case  was  clearly  admissible  to  show  a  want  of  consideration  ; 
but  in  cases  where  there  is  consideration,  it  seems  that  evidence  that  the 
instrument  was  delivered  on  condition  that  the  defendant  was  not  to  incur 
any  liability  thereon,  is  contradictory  and  repugnant  to  the  act  of  delivery. 
Cf.  Perry  v.  Bigelow,  128  Mass.  129 ;  Bigelow,  Bills  and  Notes,  16. 


40  FORM   AND   REQUISITES. 


CHAPTER  III. 

FORM    AND    REQUISITES. 


GAY   V.   EOOKE. 

Supreme  Court  of  Massachusetts,  January,  1890.     151  Mass.  115; 
23  N.  E.  Rep.  835. 

A  negotiable  promissory  note  must  contain  a  promise.^ 

Contract  on  the  following  instrument,  declared  on  as  a  promis- 
sory note:  "  Marlboro',  Sept.  23,  1881.  I.  0.  U.,  E.  A.  Gay,  the  sum 
of  seventeen  dolls,  y-^^  for  value  received.    John  E.  Eooke." 

Writ  dated  September  19,  1887.  At  the  trial  in  the  Superior 
Court,  without  a  jury,  before  Dewey,  J.,  the  only  issue  was  whether 
the  plaintiff  was  entitled  to  interest  from  the  date  of  the  instrument, 
or  from  that  of  the  writ,  the  service  of  which  was  the  only  demand 
made  by  the  plaintiff. 

The  plaintiff  asked  the  judge  to  rule,  as  a  matter  of  law,  that  he 
was  entitled  to  interest  from  the  date  of  the  instrument.  The  judge 
declined  so  to  rule,  and  ruled  that  interest  could  be  recovered  from 
the  date  of  the  writ  only,  and  found  for  the  plaintiff  for  $17.05  only; 
and  the  plaintiff  alleged  exceptions. 

[Argument  not  reported.] 

Devens,  J,  In  order  to  constitute  a  good  promissory  note  there 
should  be  an  express  promise  on  the  face  of  the  instrument  to  pay 
the  money.  A  mere  promise  implied  by  law,  founded  on  an  ac- 
knowledged indebtedness,  will  not  be  sufficient.  Story,  Prom.  Notes, 
§  14;  Brown  v.  Gilman,  13  Mass.  158.  While  such  promise  need 
not  be  expressed  in  any  particular  form  of  words,  the  language  used 
must  be  such  that  the  written  undertaking  to  pay  may  fairly  be 
deduced  therefrom.  Commonwealth  Ins.  Co.  v.  Whitney,  1  Met.  21. 
In  this  view  the  instrument  sued  on  cannot  be  considered  a  promis- 
sory note.  It  is  an  acknowledgment  of  a  debt  only,  and,  although 
from  such  an  acknowledgment  a  promise  to  pay  may  be  legally  im- 
plied, it  is  an  implication  from  the  existence  of  the  debt,  and  not 
from  any  promissory  language.  Something  more  than  this  is  neces- 
sary to  establish  a  written  promise  to  pay  money.    It  was  therefore 

1  N.  I.  L.  §  18. 


GAY   V.   EOOKE.  41 

held  in  Gray  v,  Bowden,  23  Pick.  282,  that  a  memorandum  on  the 
back  of  a  promissory  note,  in  these  words,  "  I  acknowledge  the  within 
note  to  be  just  and  due,"  signed  by  the  maker  and  attested  by  a 
witness,  was  not  a  promissory  note  signed  in  the  presence  of  an 
attesting  witness  within  the  meaning  of  the  statute  of  limitations. 
In  England  an  I.  0.  U.,  there  being  no  promise  to  pay  embraced 
therein,  is  treated  as  a  due  bill  only.  The  cases,  which  arose  prin- 
cipally under  the  stamp  act,  are  very  numerous,  and  they  have  held 
that  such  a  paper  did  not  require  a  stamp,  as  it  was  only  evi- 
dence of  a  debt.  1  Danl.  Neg.  Instr.  (3d  ed.)  §  36;  1  Eandolph, 
Com.  Paper,  §  88;  Fesenmayer  v.  Adcock,  16  M.  &  W.  449;  Mela- 
notte  V.  Teasdale,  13  M.  &  W.  216 ;  Smith  v.  Smith,  1  F.  &  F.  539 ; 
Gould  V.  Coombs,  1  C.  B.  543 ;  Fisher  v.  Leslie,  1  Esp.  425 ;  Israel 
V.  Israel,  1  Camp.  499 ;  Childers  v.  Boulnois,  Dowl.  &  Ey.  N.  P.  8 ; 
Beeching  v.  Westbrook,  8  M.  &  W.  411. 

While  in  a  few  States  it  has  been  held  otherwise,  the  law,  as  gen- 
erally understood  in  this  country,  is,  that,  in  the  absence  of  any 
statute,  a  mere  acknowledgment  of  a  debt  is  not  a  promissory  note, 
and  such  is,  we  thinlc,  the  law  of  this  Commonwealth.  Gray  v. 
Bowden,  23  Pick.  282;  Commonwealth  Ins.  Co.  v.  Whitney,  1  Met. 
21 ;  Daggett  v.  Daggett,  124  Mass.  149 ;  Almy  v.  Winslow,  i26  Mass. 
342;  Carson  v.  Lucas,  13  B.  Mon.  (Ky.)  213;  Garland  v.  Scott, 
15  La,  An.  143;  Currier  v.  Lockwood,  40  Conn.  349;  Brenzer  v. 
Wightman,  7  Watts  &  Serg.  264;  Biskup  v.  Oberle,  6  Mo.  App.  583. 
Some  States  have  by  statute  extended  the  law  of  bills  and  promissory 
notes  to  all  instruments  in  writing  whereby  any  person  acknowledges 
any  sum  of  money  to  be  due  to  any  other  person,  1  Eandolph,  Com. 
Paper,  §  88 ;  Eev.  Sts.  111.  1884,  c.  98,  §  3 ;  Gen.  Sts,  Col.  1883,  c.  9, 
§  3;  Eev.  Sts.  Ind.  1881,  §  5501;  Code,  Iowa,  1873,  §  2085;  Eev. 
Code,  Miss.  1880,  §§  1123,^124. 

We  have  no  occasion  to  comment  upon  those  instruments  in  which 
words  have  been  used  or  superadded  from  which  an  intention  to 
accompany  the  acknowledgment  with  a  promise  to  pay  has  been 
gathered,  or  where  the  form  of  the  instrument  fairly  led  to  that 
conclusion.  Daggett  v.  Daggett,  124  Mass.  149 ;  Almy  v.  Winslow, 
126  Mass.  342,  No  such  words  exist  in  the  instrument  sued  [on], 
nor  is  it  in  form  anything  but  an  acknowledgment.  The  words  "  for 
value  received  "  recite  indeed  the  consideration,  but  they  add  nothing 
which  can  be  interpreted  as  a  promise  to  pay.  It  is  therefore  un- 
necessary to  consider  whether,  if  the  paper  were  a  promissory  note, 
interest  should  be  calculated  from  its  date.  Upon  this  point  we 
express  no  opinion.  If  it  is  to  be  treated  as  an  acknowledgment  of 
debt  only,  as  we  think  it  must  be,  the  plaintiff  is  not  entitled  to 
interest  except  from  the  date  of  the  writ.  Even  if  it  was  the  duty 
of  the  defendant  to  have  paid  the  debt  on  demand,  yet  if  no  demand 
was  made,  if  no  time  was  stipulated  for  its  payment,  if  there  was 


42  FORM  AND   REQUISITES. 

no  contract  or  usage  requiring  the  payment  of  interest,  and  if  the 
defendant  was  not  a  wrongdoer  in  acquiring  or  detaining  the  money, 
interest  should  be  computed  only  from  the  demand  made  by  the 
service  of  the  writ.  Dodge  v.  Perkins,  9  Pick.  368 ;  Hunt  v.  Nevers, 
15  Pick.  500.  "  In  general,"  saA-s  Chief  Justice  Shaw,  "  when  there 
is  a  loan  without  any  stipulation  to  pay  interest,  and  where  one  has 
the  money  of  another,  having  been  guilty  of  no  wrong  in  obtaining 
it,  and  no  default  in  retaining  it,  interest  is  not  chargeable."  Hub- 
bard V.  Charlestown  Railroad,  11  Met.  124;  Calton  v.  Bragg,  15  East, 
222;  Shaw  v.  Picton,  4  B.  &  C.  715;  Moses  v.  Macferlan,  2  Burr. 
1005 ;  Walker  v.  Constable,  1  Bos.  &  P.  306. 

Exceptions  overruled. 


WHEATLEY  v.  STROBE. 

Supreme  Court  of  California,  January,  1859.     12  Cal.  92. 

A  bill  of  exchange,  an  order.^ 

Assumpsit  to  recover  a  sum  of  money  owed  by  the  defendant  to 
the  plaintiff.  Defence,  that  the  plaintiff  owed  one  H,  and  to  pay  his 
debt  to  H,  the  plaintiff  drew  the  following  order  on  the  defendant, 
which  was  presented  by  H  to  the  defendant  and  verbally  accepted  by 
him. 

"  Sac  City,  July  18,  1857. 

Mr.  Strobe:  Please  pay  the  bearer  of  these  lines  two  hundred 
and  thirty-six  dollars,  and  charge  the  Sjame  to  my  account. 

E.  D.  Wheeler." 

The  plaintiff  demurred;  demurrer  sustained  and  the  defendant 
appealed. 

[Argument  reported.] 

Field,  J.  Upon  the  facts  in  this  case  the  appellants  make  two 
points :  First.  That  the  verbal  acceptance  of  Strobe  was  sufficient  to 
render  him  liable  to  H  upon  the  order  of  Wheatley.  .  .  .  The  first 
of  these  points  cannot  be  sustained.  The  order  possesses  all  the 
requisites  of  an  inland  bill  of  exchange.  It  contains  a  direction  for 
the  payment  of  money  by  one  person  to  another,  absolutely  and  at  all 
events.  As  no  time  is  specified,  it  is  to  be  taken  as  payable  at  sight.^ 
No  further  particulars  than  these  are  essential  to  constitute  a  bill  of 
exchange.  The  insertion  of  the  word  "  please  "  does  not  alter  the 
character  of  the  instrument.    This  is  the  usual  term  of  civility,  and 

1  N.  I.  L.  §  18. 

2  Apparently  a  slip  for  on  demand. 


QUINBY   V.   MERRITT.  43 

does  not  necessarily  imply  that  a  favor  is  asked.     (Story  on  Bills, 
sec.  33  and  notes;   3  Kent,  74.) 

The  order  being  a  bill  of  exchange,  the  written  acceptance  of 
Strobe  was  necessary  to  charge  him  as  acceptor  under  the  statute. 
His  verbal  acceptance  was  insufficient.  (Act  concerning  Bills  of 
Exchange,  sec.  6.)     Upon  the  order,  therefore,  he  is  not  liable.  .  .  . 

Judgment  reversed. 


QUINBY   V.    MEERITT. 
Supreme  Court  of  Tennessee,  December,  1850.     11  Humph,  439. 
For  the  paj'ment  of  mouey.i     [It  must  not  be  payable  in  the  disjunctive.^] 
The  case  is  stated  in  the  opinion. 

[Argument  not  reported.] 

ToTTEX,  J.  The  action  is  founded  on  an  obligation  executed  by 
the  defendant  to  Susan  Quinby,  on  the  29th  October,  1842,  by  which 
he  agreed  to  pay  to  Susan  Quinby  one  hundred  and  forty  dollars  in 
carpenter's  work,  and  upon  said  obligation  are  the  following  in- 
dorsements, to  wit :  "  Pay  the  within  to  the  order  of  C.  W.  or  W.  L. 
Xance,"  signed  "  Susan  Quinby ; "  "I  assign  the  within  to  Wm. 
Warmouth,  without  recourse  on  me,  Oct.  14,  1846,"  signed  "  C.  W. 
Nance." 

His  honor  the  judge  instructed  the  Jury  "  that  if  the  paper  in  suit 
was  assigned  to  C.  W.  or  W.  L.  Nance,  the  assignment  of  one  of 
them  would  not  transfer  the  paper ;  but  if  both  had  assigned  it,  the 
word  '  or '  would  be  construed  '  and,'  to  effectuate  the  intention  of 
the  party."  The  verdict  was  of  course  for  the  defendant,  and  the 
only  question  is,  whether  there  was  error  in  the  instruction  to  the 
jury ;  and  we  are  of  the  opinion  that  there  was  not. 

As  to  the  character  of  the  instrument,  we  may  observe  that  it  is 
not  a  negotiable  paper  in  the  sense  of  the  law  merchant ;  though  by 
statute  (1801,  ch.  6,  §  54)  such  a  contract  is  assignable  so  as  to 
transfer  the  legal  interest  and  to  enable  the  assignee  to  sue  in  his 
own  name.    \^Tiiteman  v.  Childress,  6  Humph.  309. 

The  case  of  Willoughby  v,  Willoughby,  5  N.  H.  244,  was  an  action 
by  one  of  the  payees  on  a  note  payable  to  Washington  or  Joseph 
Willoughby,  and  the  court  was  of  opinion  that  the  note  was  evidence 
of  a  contract  with  both  the  payees  jointly ;  that  "  or  "  in  the  note  must 
be  understood  to  mean  "  and ; "  and  therefore  that  one  of  the  payees 
could  not  maintain  the  suit  without  joining  the  other. 

In  Blanckenhagen  v.  Blundell,  2  Barn.  &  A.  417,  and  Walrad 

1  N.  I.  L.  §  18.  2  Cf.  N.  I.  L.  §  25. 


44  FORM   AND   REQUISITES. 

V.  Petrie,  4  Wend.  575,  the  notes  were  made  paj'able  to  two  persons  in 
the  disjunctive,  and  a  simihir  view  of  the  subject  was  talien.  But 
these  cases  are  principally  to  the  point  that  such  a  note  is  not  valid 
as  a  promissory  note,  because  of  the  uncertainty  of  the  person  entitled 
to  the  payment ;  and  certainly  that  is  to  be  taken  as  the  settled  doc- 
trine as  to  promissory  notes,  made  negotiable,  as  under  the  law  mer- 
chant.   Story  on  Prom.  Notes,  §  33. 

The  case  of  Ellis  v.  McLemood,  1  Bailey  (S.  C),  13,  maintains  a 
different  rule,  and  decides  that  one  of  the  payees  of  a  note  may  alone 
maintain  the  action,  because  it  is  made  payable  to  either.  This  case 
must  be  considered  as  standing  opposed  to  the  weight  of  authority 
on  this  subject,  and  we  are  by  no  means  satisfied  with  the  principle 
it  holds  or  the  reasoning  employed  to  maintain  it.^ 

Although  such  paper  be  not  valid  as  a  promissory  note,  yet  it  is 
evidence  of  a  contract  for  the  payment  of  money,  and,  according  to 
the  cases  referred  to,  and  especially  that  in  5  N.  H.,  it  is  evidence 
with  both  the  payees  jointly;  and  they  have  therefore  a  joint  in- 
terest in  the  fund  secured  by  such  note. 

If  this  view  of  the  subject  be  not  correct,  then  the  note  or  other 
contract  so  made  payable  to  two  or  more  in  the  disjunctive  should 
be  taken  as  void  for  uncertainty,  as  we  do  not  see  that  any  one  of 
the  payees  can  have  a  better  claim  than  another  to  sue  upon  the 
note  or  contract,  or  demand  its  payment.  It  is  true  that  a  payment 
to  any  one  of  them  would  be  a  discharge  of  the  contract;  but  that 
is  also  true  when  the  note  or  contract  is  made  payable  to  two  or 
more  persons  jointly ;  a  payment  to  one  is  a  payment  to  all,  although 
they  have  a  joint  interest  in  the  fund, 

"We  think  it  more  conformable  to  reason  as  well  as  authority  to 
hold  such  a  contract  as  valid,  and  as  conferring  a  joint  interest  on 
the  persons  with  whom  it  is  made,  and  who  are  entitled  to  its  pro- 
ceeds. Now  to  apply  this  principle  to  the  present  case,  the  assign- 
ment to  "  C.  W.  or  "W.  L.  Nance  "  will  be  construed  as  conferring 
upon  them  not  a  separate  but  a  joint  interest  in  the  contract,  that 
being  the  intention  as  well  as  legal  effect ;  and  as  oniy  one  of  them 
has  assigned  to  the  plaintiff,  it  follows  that  the  plaintiff  is  not  in- 
vested with  the  legal  title  to  the  contract,  and  therefore  cannot  main- 
tain an  action  upon  it.  It  certainly  was  competent  for  him,  as  the 
o\\Tier  of  this  obligation,  to  strike  out  the  assignments,  they  being 
imperfect,  and  to  sue  in  the  name  of  the  payee  for  his  use;  but  as 
he  relies  upon  the  assignments,  and  they  do  not  transfer  the  legal 
title,  the  present  action  cannot  be  maintained.    Let  the  judgment  be 

Affirmed. 

1  See  Osgood  v.  Pearsons,  4  Graj,  455  ;  Bigelow,  Bills  and  Notes,  14. 


COTA  V.   BUCK.  45. 

COTA   V.   BUCK. 
Supreme  Court  of  Massachusetts,  March,  1840.     7  Met.  588. 
Absolutely  and  at  all  events.^ 

Indebitatus  assumpsit  on  the  common  money  counts.  Plea,  the 
general  issue.    Trial  in  the  Court  of  Common  Pleas. 

The  plaintiff,  to  maintain  the  issue  on  his  part,  offered  in  evidence 
the  following  instrument:  "New  Ashford,  March  13th,  1840.  For 
value  received,  I  promise  to  pay  John  Pero,  or  bearer,  five  hundred 
and  seventy  dollars  and  fifty  cents,  it  being  for  property  I  purchased 
of  him  in  value  at  this  date,  as  being  payable  as  soon  as  can  be 
realized  of  the  above  amount  for  the  said  property  I  have  this  day 
purchased  of  said  Pero,  which  is  to  be  paid  in  the  course  of  the  season 
now  coming.    Bushrod  Buck." 

The  defendant  objected  that  this  instrument  was  not  a  negotiable 
note,  and  therefore  could  not  be  given  in  evidence  by  the  plaintiff 
in  this  action  brought  in  his  own  name.  The  court  decided  that  the 
instrument  was  a  negotiable  note  transferable  by  delivery,  and  it  was 
given  in  evidence  to  the  jury,  who  returned  a  verdict  thereon  for  the 
plaintiff.    The  defendant  alleged  exceptions  to  said  decision. 

[Argument  reported.] 

Shavs^,  C.  J.  The  true  test  of  the  negotiability  of  a  note  seems  to 
be,  whether  the  undertaking  of  the  promisor  is  to  pay  the  amount  at 
all  events,  at  some  time  which  must  certainly  come,  and  not  out  of 
a  particular  fund  or  upon  a  contingent  event.  If  it  were  payable  on 
a  contingenc)'-,  or  out  of  a  particular  fund,  it  would  not  be  nego- 
tiable. This  note,  we  think,  was  payable  by  the  promisor  at  all 
events,  and  within  a  certain  limited  time.  The  note  is  obscurely 
written  and  ungrammatical.  But  we  think  the  meaning  was  this; 
that  the  signer,  for  value  received  in  the  purchase  of  property,  prom- 
ised to  pay  Pero  or  bearer  the  sum  named,  as  soon  as  the  termination 
of  the  coming  season,  and  sooner,  if  the  amount  could  be  sooner  real- 
ized out  of  the  fund.  Such  reference  to  the  sale  of  the  property  was 
not  to  fix  the  fund  from  which  it  was  to  be  paid,  but  the  time  of 
payment.  The  undertaking  to  pay  was  absolute,  and  did  not  depend 
on  the  fund.  So  as  to  the  time,  whatever  time  may  be  understood 
as  the  "  coming  season ; "  whether  harvest  time  or  the  end  of  the 
year,  it  must  come  by  mere  lapse  of  time,  and  that  must  be  the  ulti- 
mate limit  of  the  time  of  payment.^ 

Exceptions  overruled. 

1  N.  I.  L.  §  18,  2. 

2  Cf.  Way  V.  Smith,  111  Mass.  523 ;  Stults  v.  SUva,  119  Mass.  137  ;  N.  I.  L.  §  21, 2. 
See  note  to  Mattison  v.  Marks,  post,  p.  53. 


46  FORM   AND   REQUISITES. 

HASKELL   V.   LAMBEET. 
Supreme  Court  of  Massachusetts,  November,  18G0.     16  Gray,  592. 
And  not  upon  any  contingency .^ 

Contract  by  the  plaintiff  as  indorsee  against  the  defendant  as 
second  indorser  of  the  following  instrument : 

"  Boston,  January  4th,  1850.  Six  months  after  date  I  promise  to 
pay  to  the  order  of  myself  twenty-four  hundred  dollars,  value  received, 
to  be  held  as  collateral  security  for  the  payment  of  E.  Boynton's  note, 
December  5th,  6  months  for  $968.41 ;  P.  E.  Webster's  note,  Septem- 
ber 7th,  6  months  for  $257.72,  and  his  acceptance,  December  11th, 
6  months  for  $178.10;  M.  Bartlett  &  Co.'s  note,  May  7th,  6  months 
for  $435.40;  Wm.  M.  Jackson's  note,  November  5th,  6  months  for 
$562.59.  George  Lambert." 

No  objection  was  made  in  the  answer  to  the  form  of  the  note ;  but 
at  the  trial  in  the  Superior  Court  of  Suffolk  at  May  term,  1859, 
Morton,  J.,  ruled  that  if  all  the  facts  necessary  to  make  out  his  case 
were  proved,  the  plaintiff  could  not  maintain  this  action,  because  the 
instrument  declared  on  was  not  a  negotiable  promissory  note.  Ver- 
dict for  the  defendant;   the  plaintiff  alleged  exceptions. 

[Argument  not  reported.] 

Bigelow,  C.  J.  The  contract  declared  on  is  in  legal  effect  a 
promise  to  pay  a  sum  of  money  in  six  months  after  its  date  if  cer- 
tain debts  enumerated  in  it  are  not  paid  by  the  persons  liable  there- 
for. It  is  therefore  not  an  absolute  promise  to  pay  money  at  all 
events,  but  only  upon  a  contingency.  Nor  is  it  certain  as  to  the 
sum  which  will  be  payable  at  its  maturity.  Being  given  as  collateral 
security  for  certain  specified  debts,  for  which  different  persons  are 
liable,  the  payment  of  any  portion  of  such  debts  will  reduce  the 
amount  pro  tanto  for  which  the  defendant  can  be  held  upon  his 
promise.  It  is  therefore  an  agreement  to  pay  the  whole  sum  in  a 
certain  contingency,  or  such  part  thereof  as  may  not  be  paid  by 
certain  other  persons.  In  these  particulars  it  lacks  tire  essential  / 
qualities_of  a  promissory  note.  It  is  a  contingent  promise,  and  the 
sum  which  will  be  due  upon  it  at  the  expiration  of  six  months  is 
uncertain.  A  promise  to  pay  money,  not  certain  as  to  amount,  and 
contingent  upon  a  future  event,  is  not  regarded  as  negotiable,  be- 
cause it  carries  with  it  on  its  face  notice  of  the  contingency  or 
uncertainty,  and  the  holder  or  assignee  must  be  bound  by  the  stipu- 
lation, and  must  take  it  subject  to  all  the  equities.  Although  he  may 
have  paid  full  value  for  it,  he  cannot  enforce  it  except  oji  the  pre- 

1  N.  I.  L.  §  18,  2. 


SCHMITTLER   V.   SIMON.  47 

scribed  contingency  or  for  the  amount  which  may  at  its  maturity 
turn  out  to  be  due.  Besides,  it  would  essentially  infringe  on  an 
established  and  salutary  rule  of  law  to  hold  a  conditional  or  contin- 
gent promise  to  pay  money  valid,  without  requiring  proof  of  con- 
sideration. The  case  at  bar  is  very  similar  to  Eobins  v.  May,  11  Ad. 
&  El.  213,  and  3  P.  &  Dav.  147.  "  See  also  Byles  on  Bills  (6th  ed.), 
71 ;  Cota  v.  Buck,  7  Met.  589. 

The  contract  not  being  negotiable,  and  there  being  no  proof  of 
any  express  promise  by  the  defendant  to  pay  to  the  plaintiff  the 
amount  of  the  note  or  any  part  of  it,  it  is  clear  that  the  present 
action  cannot  be  maintained,  and  that  no  amendment  of  the  declara- 
tion can  be  made  under  which  the  plaintiff  would  be  entitled  to 
recover. 

Exceptions  overruled. 


SCHMITTLER   v.    SIMOK 

Court  of  Appeals  of  New  York,  March,  1886.     101  N.  Y.  554. 

Nor  out  of  a  particular  fund. 

Action  by  the  indorsee  against  the  acceptor  of  a  bill  of  exchange. 
The  facts  are  stated  in  the  opinion. 

[Argument  reported.] 

EuGER,  C.  J.  The  plaintiff  claimed  to  recover  as  the  holder  of 
a  draft,  drawn  upon  and  accepted  by  the  defendant,  reading  as 
follows : 

"  New  York,  February  26,  1877. 

Mr.  Adam  Simon,  executor,  will  please  pay  to  Johannes  Schmit- 
tler  or  his  order  on  the  first  day  of  July,  which  will  be  in  the  year 
of  1879,  the  sum  of  $900,  with  seven  per  cent  interest,  to  be  paid 
besides  this  amount  yearly,  July  month,  and  charge  the  amount 
against  me  and  of  my  mother's  estate. 

William  J.  Scharen." 

"Written  upon  the  face :  "  Accept,  Adam  Simon,  executor,"  and  in- 
dorsed :  "  Pay  to  the  order  of  Mary  Schmittler,  the  amount  of  note. 
Johannes  Schmittler." 

Upon  the  trial,  after  proving  the  execution  of  the  draft,  its  accept- 
ance and  transfer,  and  offering  to  prove  the  payment  of  a  considera- 
tion by  the  plaintiff  to  the  payee,  which  was  objected  to  by  the 
defendant,  and  excluded  by  the  court,  the  plaintiff  rested.  The 
defendant  thereupon  moved  to  nonsuit  upon  the  ground  that  the 
obligation  was  not  binding  upon  the  defendant  personally,  but  he 


48  FORM   AND   REQUISITES. 

was  liable  thereon,  if  at  all,  in  his  representative  character  alone, 
and  that  it  was  payable  out  of  a  specific  fund,  and  a  recovery  thereon 
could  not  be  had  without  proving  the  existence  and  extent  of  such 
fund.  The  court  thereupon  nonsuited  the  plaintiff,  to  which  decision 
she  excepted.  The  General  Term  having  affirmed  the  determination 
of  the  trial  court,  the  plaintiff  took  this  appeal. 

We  think  the  court  below  erred  as  to  both  of  the  grounds  upon 
which  their  judgment  proceeded.  That  the  defendant  was  liable 
upon  the  draft,  if  liable  at  all,  in  his  individual  capacity  alone, 
seems  under  the  authorities  to  admit  of  no  doubt. 

Being  of  the  opinion,  therefore,  that  the  defendant  is  liable  upon 
the  draft  in  question  in  his  individual  capacity  alone,  the  question 
still  remains  as  to  the  extent  of  such  liability.  He  was  undoubtedly 
competent  to  enter  into  a  personal  contract  in  reference  to  the  funds 
in  his  possession,  and  in  such  case  would  be  bound  to  perform  ac- 
cording to  the  tenor  and  legal  effect  of  the  obligation  assumed  by 
him,  and  entitled  to  be  allowed  the  amount  paid  upon  an  accounting, 
as  executor.  Such  instruments  are  subject  to  the  rules  of  construc- 
tion applicable  to  other  contracts,  and  must  be  interpreted  upon 
consideration  of  the  language  used  by  the  parties,  with  a  view  of 
arriving  at  their  intention  in  executing  them.  The  court  below  held 
that  the  draft  in  question  was  payable  only  from  a  particular  fund, 
and  was,  therefore,  non-negotiable,  and  enforceable  only  to  the  extent 
of  the  fund  referred  to. 

.  Considering  the  question,  as  we  are  compelled  to  do,  from  the  lan- 
guage of  the  instrument  alone,  we  are  unable  to  agree  to  the  inter- 
pretation thus  put  upon  it.  It  is  not  claimed  that  there  is  any 
distinction  between  the  instrument  in  question  and  an -ordinary  bill 
of  exchange  except  that  made  by  the  clause  referring  to  the  mother's 
estate.  Unless  that  clause  deprives  the  paper  of  its  commercial  char- 
acter, the  rights  and  liabilities  of  the  parties  thereto  must  be  governed 
by  the  rules  pertaining  to  negotiable  securities,  which  would  render 
the  defendant  liable  for  the  amount  named  in  the  draft,  upon  the 
theory  that  his  acceptance  was  an  admission  by  him  of  assets  ap- 
plicable to  its  payment. 

The  distinction  between  a  fund  from  which  a  draft  or  order  is 
directed  to  be  paid,  and  one  referred  to  as  the  means  of  reimburse- 
ment as  to  its  drawee,  is  a  material  one  and  cannot  be  disregarded 
in  the  construction  of  such  instruments.  Thus  it  is  said :  "  When  a 
reference  is  made  to  a  special  fund  merely  as  a  direction  to  the 
drawee  how  to  reimburse  himself,  and  the  payment  is  not  made  to 
depend  upon  the  adequacy  of  the  fund,  it  will  not  vitiate  the  bill."  ^ 
Edw.   on   Bills   and   Notes,    §    158.      See   also   Parsons  on   Merc. 

1  N.  I.  L.  §  20. 


SCIIMITTLER   V.    SIMON.  49 

Law,  87;   Chitty  on  Bills,  158;  Dwight,  Com.,  in  Munger  v.  Shan- 
non, 61  N.  Y.  255. 

It  is  thus  seen  that  the  mere  mention  of  a  fund  in  a  draft,  does 
not  necessarily  deprive  it  of  the  character  of  commercial  paper,  but 
it  must  further  appear,  in  order  to  have  that  effect,  that  it  contains 
either  an  express  or  implied  direction  to  pay  it  therefrom  and  not 
otherwise. 

The  question,  therefore,  to  be  determined  here  is,  whether  the 
fund  in  question  is  referred  to  as  the  measure  of  liability  or  the 
means  of  reimbursement.  While  the  point  is  not  free  from  doubt, 
we  think  a  reasonable  construction  of  the  draft  favors  the  conclu- 
sion that  it  is  mentioned  only  as  the  source  of  reimbursement.  No 
express  language  in  it  can  be  pointed  out  as  requiring  its  payment 
from  the  funds  mentioned,  and  none  from  which  that  requirement 
can  be  implied,  except  such  as  exists  in  all  drafts  where  a  fund  is 
referred  to.  Its  language  is  to  "  charge  the  amount  against  me  and 
of  my  mother's  estate,"  and  contains  no  provision  for  delay  until  the 
amount  is  realized  from  the  estate,  or  for  payment  pro  tanto  in  case 
the  estate  should  prove  insufficient  to  pay  the  whole  amount.  There 
is  no  language  importing  a  transfer  of  the  fund  to  the  payee,  and 
nothing  from  which  such  an  intention  can  be  inferred.  The  draft 
contains  an  absolute  direction  to  pay  a  fixed  sum,  at  a  specified  date, 
with  interest.  It  imports  a  present  indebtedness  of  a  sum  named, 
from  the  drawee  to  the  payee,  and  an  absolute  direction  to  pay  that 
sum  at  a  fixed  date,  subject  to  no  contingency  either  as  to  time  or 
amount.  In  express  language  he  directs  the  amount  when  paid  to  be 
charged  against  him  individually,  and  adds  the  words,  plainly  imply- 
ing, as  we  think,  that  the  fund  for  the  acceptor's  reimbursement 
would  be  found  in  an  amount  eventually  or  immediately  pa3'^able  to 
the  drawer  from  his  mother's  estate. 

We  think,  also,  that  the  insertion  of  words  expressly  making  the 
paper  negotiable  was  quite  significant,  and  indicated  an  intention  on 
the  part  of  all  parties  that  it  should  be  transferable,  and  partake  of 
the  character  of  commercial  paper.  Any  contingency  inferable 
from  the  language  of  the  draft,  making  the  amount  payable  thereon 
indefinite  and  uncertain,  would  tend  largely  to  depreciate  its  value  for 
such  purpose,  and  defeat  the  intention  with  which  it  was  apparently 
made. 

If  the  language  of  the  paper  could  be  considered  at  all  ambiguous, 
it  was  the  duty  of  the  defendant  to  limit  his  liability  by  apt  words 
of  acceptance  when  it  was  presented  to  him,  but  as  it  is,  he  has  un- 
qualifiedly promised  to  pay  a  fixed  and  definite  sum  at  a  specified 
time,  and,  we  think,  should  be  held  to  the  contract  which  other  parties 
were  authorized  by  his  acceptance  to  infer  he  intended  to  make. 


50  FORM   AND   REQUISITES. 

In  all  the  cases  examined  by  us  where  an  order  has  been  held  to 
operate  as  an  equitable  assignment  of  a  fund,  there  were  either  special 
phrases  contained  in  the  instrument,  indicating  an  intent  to  have  it 
so  operate,  or  ambiguous  language  used,  which,  construed  in  the  light 
of  surrounding  circumstances,  justified  the  inference  of  a  limitation 
of  liability.  Parker  v.  Syracuse,  31  N.  Y.  376;  Alger  v.  Scott, 
54  N.  Y.  14;  Hunger  v.  Shannon,  61  N.  Y.  351 ;  Ehrichs  v.  DeMill, 
75  N.  Y.  370 ;  Brill  v.  Tuttle,  81  N.  Y.  454.  Here,  however,  there 
is  no  such  language,  and  this  contract  is  to  pay  a  fixed  amount  at  a 
specified  date,  absolutely  and  unconditionally. 

We  are,  therefore,  of  the  opinion  that  the  instrument  in  question 
is  a  bill  of  exchange,  and  rendered  the  parties  executing  it  liable  abso- 
lutely for  the  amount  stated  therein. 

The  judgment  of  the  courts  below  should  be  reversed  and  a  new 
trial  ordered,  with  costs  to  abide  the  event. 

All  concur. 

Judgment  reversed. 


SMITH   V.   KENDALL. 

Supreme  Court  of  Michigan,  July,  1861.     9  Mich.  240. 

The  sum  payable  must  be  certaiu,i  and  certainty  is  to  be  determined  according  to 
the  law  merchant. 

Action  by  the  indorsee  against  the  makers  of  a  promissory  note  in 
the  following  form : 

"  $793.98.  New  York,  July  13,  1858. 

Eight  months  after  date,  we,  the  subscribers,  of  Grand  Eapids, 
county  of  Kent,  state  of  Michigan,  promise  to  pay  to  the  order  of 
Ely,  Brown  &  McConnell,  seven  hundred  and  ninety-three  98-100 
dollars,  at  the  banking  house  of  Duncan,  Sherman  &  Co.,  value  re- 
ceived, with  current  exchange  on  New  York. 

(Signed)         Smith  &  McConnell." 

Indorsed  by  Ely,  Brown,  &  McConnell. 

Verdict  was  for  the  plaintiff,  and  the  defendant  brought  writ  of 
error. 

[Argument  not  reported.] 

Manning,  J.  The  instrument  for  $793.98,  it  is  argued,  is  not  a 
promissory  note,  because  it  is  payable  with  current  exchange  on  New 

1  N.  I.  L.  §  19. 


SMITH   V.   KENDALL.'  51 

York.  It  calls  for  $793.98,  if  paid  in 'the  city  of  New  York;  if 
paid  elsewhere,  it  calls  for  that  amount,  with  such  additional  sum, 
called  exchange,  as  will  make  the  amount,  where  paid,  equivalent  to 
$793.98  in  the  city  of  New  York. 

A  promissory  note  must  be  for  the  payment  of  a  certain  sum  of 
money.  Exchange  varies  from  time  to  time,  and  might  have  been 
more  or  less  when  the  $793.98  were  to  be  paid  than  when  the  in- 
strument was  given.  Is  this  fluctuation,  to  which  exchange  is  sub- 
ject, such  a  contingency  or  uncertainty  as  the  rule  requiring  a  note 
to  be  for  a  sum  certain  was  intended  to  guard  against?  We  think 
not.  Bills  of  exchange  and  promissory  notes  are  commercial  instru- 
ments, and,  to  facilitate  commerce,  are  subject  to  certain  rules  of 
law  not  applicable  to  other  contracts.  These  rules  should  be  liberally 
construed,  and  in  such  a  way  as  to  effect  the  object  had  in  view. 
Exchange  is  an  incident  to  bills  for  the  transmission  of  money  from 
one  place  to  another.  Its  nature  and  effect  are  well  understood  in 
the  commercial  world;  and  merchants  having  occasion  to  use  their 
funds  at  their  place  of  business,  sometimes  made  the  currency  at 
that  point  the  standard  of  payments  made  to  them  by  their  customers 
at  a  different  point.  Such  is  the  design  of  the  instrument  before 
us;  and  we  believe  such  instruments  are  considered  by  commercial 
men  to  be  promissory  notes.  In  Pollard  v.  Herries,  3  B.  &  P.  335, 
P.  deposited  a  sum  of  money  with  H.,  in  Paris,  and  took  H.'s  note, 
"  payable  in  Paris,  or,  at  the  choice  of  the  bearer,  at  the  Union  Bank 
in  Dover,  or  at  H.'s  usual  residence  in  London,  according  to  the  course 
of  exchange  upon  Paris."  This  instrument  was  declared  on  as  a 
promissory  note,  and  spoken  of  and  treated  by  both  counsel  and  court 
as  a  promissory  note.  It  is  called  a  promissory  note  by  the  reporter, 
and  treated  as  such  by  Mr.  Chitty  in  his  treatise  on  Bills  of  Exchange, 
pp.  232,  424,  In  Leggett  v.  Jones,  10  Wis.  34,  a  written  promise 
to  pay  a  sum  of  money,  "  with  exchange  on  New  York,"  was  held  to 
be  a  promissory  note. 

There  is  nothing  in  the  other  objection.  The  note  was  indorsed 
by  Ely,  Brown,  &  McConnell,  and  every  indorsee  is  the  assignee  of 
the  indorser.    The  judgment  must  be  affirmed,  with  costs. 

Martin,  C.  J.,  concurred. 

Christiancy,  J.  I  concur  in  the  opinion  of  my  brother  Manning. 
So  far  as  relates  to  the  question  of  exchange,  I  think  this  note  should 
be  considered  as  resting  upon  substantially  the  same  principle  as  if 
made  payable  in  New  York  without  exchange. 

Campbell,  J.,  dissenting.  I  do  not  think  that  a  negotiable  prom- 
issory note  can  be  made  except  for  a  sum  certain.  This  is  an  old  and 
familiar  doctrine,  which  is  laid  down  by  the  best  authorities  without 
qualification.  And  while  it  is  undoubtedly  true  that  railroad  bonds 
and  some  other  securities  of  like  character,  made  by  corporations,  have 
been  held  negotiable,  yet  there  is  no  real  difference  between  these 


52  FORM   AND   REQUISITES. 

and  ordinary  negotiable  paper  except  in  their  being  under  a  corpora- 
tion seal,  which  is  merely  the  most  appropriate  evidence  of  corporate 
action.  The  requisites  of  certainty,  both  as  to  time  and  mode  of 
payment,  have  always  been  regarded  as  substantial,  and  as  the  most 
essential  elements  of  paper  made  for  circulation  and  payable  to  the 
holder.  And  although  a  gwasi-negotiability  has  been  asserted  of 
bills  of  lading  and  some  documents  of  like  character,  yet  complete 
negotiability  has  never  been  extended  beyond  such  paper  as  has, 
since  the  statute  of  Anne,  possessed  that  quality  by  commercial  law. 
And  it  does  not  seem  to  me  in  harmony  with  any  principle  of  law 
to  break  down  the  settled  rules  which  have  given  value  and  currency 
to  such  securities.  If  negotiability  only  meant  the  liability  to  be 
sued  in  the  name  of  a  bearer  or  indorsee,  it  would  be  of  little  con- 
sequence. But  when  paper  is  made  negotiable,  it  passes  from  one 
to  another  discharged  of  all  equities  until  its  maturity.  The  parties 
who  make,  or  accept,  or  indorse  it,  become  subject  to  peculiar  lia- 
bilities. And  I  do  not  think  anything  short  of  a  clear  legislative 
authority  should  be  permitted  to  aflfix  such  burdens  or  privileges  to 
any  new  class  of  contracts. 

In  the  case  of  Pollard  v.  Herries,  3  B.  &  P.  335,  the  action  being 
between  the  immediate  parties  to  the  note,  no  question  arose  con- 
cerning its  negotiable  character;  and  there  is  no  English  case,  that 
I  am  aware  of,  which  has  given  any  countenance  to  innovation  on 
this  subject.  So  far  as  any  practice  has  existed  in  this  State,  in 
relation  to  notes  payable  with  exchange,  I  believe  it  has  not  been 
in  favor  of  their  negotiability.  The  question  has  been  raised  several 
times  in  the  federal  court  within  my  own  experience,  and  every  case 
I  have  known  has  held  them  not  to  possess  that  character.  And  I 
doubt  exceedingly  whether  the  general  opinion  of  commercial  men 
is  by  any  means  settled  in  their  favor. 

There  is  no  reason  why  one  kind  of  uncertainty  should  be  more 
favored  than  another.  It  is  very  well  settled  by  most  courts,  that 
a  note  payable  in  current  bank-bills  is  not  negotiable.  And  yet  the 
principal  objections  to  allowing  bank-bills  for  this  purpose  apply  to 
exchange.  They  both  fluctuate  in  value  under  very  simJlar  condi- 
tions. The  difference  of  exchange  between  two  places  has  no  direct 
connection  with  the  expense  of  transporting  money.  It  is  as  cheap 
to  take  money  from  New  York  to  London  as  from  London  to  New- 
York,  and  yet  there  is  a  difference  of  about  ten  per  cent  in  favor 
of  London  almost  always.  There  are,  however,  no  means  of  calcu- 
lating the  rate  in  advance;  and  fluctuations  of  several  per  cent 
occur  within  a  few  weeks.  Nor  can  the  promise  contained  in  the 
note  before  us  be  regarded  as  equivalent  to  an  agreement  to  pay 
what  will  make  a  uniform  sum  in  New  York.  This  can  only  be  on 
the  assumption  that  the  balance  of  exchange  will  always  be  one  way ; 
whereas  it  is  very  well  known  that  there  is  no  such  certainty.    And 


MATTISON   V.    MARKS.  53 

this  note  would  not  be  satisfied  by  a  payment  of  less  than  the  sum 
mentioned  in  it,  although  it  might  be  worth  much  more  than  the 
same  amount  in  New  York.  It  is  very  true  that  New  York  is  likely 
to  have  balances  against  us,  but  the  principle  adopted,  if  true  at  all, 
must  apply  to  all  places. 

It  may  be  that  public  convenience  would  be  subserved  by  changing 
the  existing  rules.  But  to  hold  this  paper  negotiable  would,  I 
think,  be  not  an  application  of  a  common-law  principle  to  a  new 
subject,  but  the  abrogation  of  a  principle  entirely.  This  would 
come  more  appropriately  from  another  department  of  the  govern- 
ment. I  regret  that  I  have  not  been  able  to  satisfy  myself  with  the 
conclusions  of  the  court  upon  this  question,  which  is  certainly  one 
of  general  interest.    Upon  the  other  points  in  the  case  I  concur. 


MATTISON   V.    MAEKS. 

Supreme  Court  of  Michigan,  April,  1875.     31  Mich.  421. 

And  the  promise  or  order  must  be  to  pay  at  a  fixed  or  determinable  future  time.* 

Suit  on  a  written  promise  to  pay  a  sum  of  money  "  on  or  before  " 
a  day  named. 

[Argument  not  reported.] 

CooLEY,  J.  ...  [A  question  of  payment  here  considered,  the 
ruling  of  the  lower  court  being  held  erroneous.] 

This  view  will  dispose  of  the  case,  unless  the  defendant  is  correct 
in  the  position  he  takes,  that  the  paper  sued  upon  is  not  a  promis- 
sory note.  If  it  is  not,  the  suit  must  fail,  because  the  declaration  has 
treated  it  as  such,  and  is  not  adapted  to  the  case  of  any  other  special 
contract.  The  objection  to  this  instrument  is,  that  it  promises  to 
pay  a  certain  sum  of  money  "  on  or  before  "  a  day  named ;  and  this, 
it  is  said,  is  not  a  promise  to  pay  on  a  day  certain,  and  consequently 
cannot  be  a  promissory  note.  We  are  referred  to  Hubbard  v.  Mosely, 
11  Gray,  170,  in  support  of  this  view.  That  case  certainly  seems 
to  support  the  position  of  defendant,  and  it  is  to  be  regretted,  per- 
haps, that  the  learned  judge  who  delivered  the  opinion  did  not  deem 
it  important  to  present  more  fully  the  reasons  that  led  him  to  his 
conclusions,  instead  of  contenting  himself  with  a  simple  reference 
to  the  general  doctrine  that  a  promissory  note  must  be  payable  at 
a  time  certain.  It  seems  to  us  that  this  note  is  payable  at  a  time 
certain.  It  is  payable  certainly,  and  at  all  events,  on  a  day  particu- 
larly named;   and  at  that  time,  and  not  before,  payment  might  be 

1  N.  I.  L.  §18,3;  §21. 


54  FORM   AND   REQUISITES. 

enforced  against  the  maker.  It  is  impossible  to  say  that  this  paper 
makes  the  payment  subject  to  any  contingency  or  puts  it  upon  any 
condition.  The  legal  rights  of  the  holder  are  clear  and  certain;  the 
note  is  due  at  a  time  fixed,  and  it  is  not  due  before.  True,  the  maker 
may  pay  sooner  if  he  shall  choose;  but  this  option,  if  exercised, 
would  be  a  payment  in  advance  of  the  legal  liability  to  pay,  and 
nothing  more.  Notes  like  this  are  common  in  commercial  transac- 
tions, and  we  are  not  aware  that  their  negotiable  quality  is  ever 
questioned  in  business  dealings.  It  ought  not  to  be  questioned  for 
the  sake  of  any  distinction  that  does  not  rest  upon  sound  reason, 
and  we  can  discover  no  sound  reason  for  the  distinction  here  insisted 
upon. 

The  judgment  must  be  Reversed. 

Note.  —  The  doctrine  of  Hubbard  v.  Mosely  was  affirmed  in  the  cases  of 
Way  V.  Smith,  111  Mass.  523,  and  in  Stults  v.  Silva,  119  Mass.  137,  though 
in  all  these  cases  the  fact  seems  to  have  been  ignored  that  it  had  been  decided 
in  Cota  v.  Buck,  7  Met.  589,  ante,  p.  45,  that  a  note  payable  "  on  or  before  "  a 
certain  time  was  negotiable.  In  the  later  cases,  however,  there  were  provi- 
sions in  the  instruments  that  the  principal  sum  was  to  be  reduced  by  a  deduc- 
tion of  interest  for  the  time,  in  case  payment  were  made  before  the  day  set ; 
hence  the  difficulty  whs  presented  that  the  sum  payable  was  not  certain.  It 
is  said  in  Way  v.  Smith,  "  This  stipulation  gives  the  maker  the  right  to  pay 
the  note  at  any  time  before  its  maturity  at  his  option,  and  such  payment 
would  discharge  his  contract.  It  renders  the  contract  uncertain  and  contin- 
gent, both  as  to  the  time  of  payment  and  the  amount  to  be  paid,  ..."  See 
contra,  Albertson  v.  Laughlin,  173  Pa.  St.  5"25;  Beatty  v.  Western  College,  177 
111.  280  ;  Bigelow,  Bills  and  Notes,  30,  36  ;  N.  I.  L.  §  21,  2. 


ADAMS    V.   KING. 
Supreme  Court  of  Illinois,  December,  1854.     16  III.  168. 
To  the  order  of  a  payee,  named  or  sufScieutly  described  in  the  instrument.! 

Demurrer  to  a  declaration  overruled. 

[Argument  not  reported.] 

ScATES,  J.  .  .  .  The  error  assigned  is  for  overruling  a  demurrer 
to  the  declaration.  It  was  in  assumpsit,  and  contained  two  counts; 
each  upon  a  promissory  note  made  by  plaintiffs  in  error  to  "  the 
administrators  of  Abner  Chase,  deceased,"  for  $400,  Mdth  six  per 
cent  interest  from  date,  for  value  received,  dated  7th  March,  1853, 
one  payable  in  six  and  the  other  in  twelve  months.  The  declaration 
further  avers  that   defendants  were   the  administrators  of   Abner 

1  N.  I.  L.  §  18,  2. 


ARMSTRONG  V.   NATIONAL  BANK.  55 

Chase  on  the  7th  March,  1853,  with  profert  of  the  letters  of  ad- 
ministration, dated  19th  December,  1851,  and  that  the  notes  were 
executed,  delivered,  and  made  payable  to  the  defendants  by  the  name 
and  style  of  the  "  administrators  of  Abner  Chase,  deceased." 

The  objections  taken  are,  that  this  is  not  a  promissory  note ;  that 
there  is  no  payee,  or  that  the  payee  is  uncertain;  or  if  there  be  a 
payee,  it  is  a  promise  to  defendants  in  their  representative  char- 
acter, and  they  should  sue  as  administrators. 

We  do  not  assent  to  either  objection.  The  general  rule  in  rela- 
tion to  bills  of  exchange  and  promissory  notes  requires  that  the 
person  to  whom  they  are  made  payable  shall  be  specified.  Chit,  on 
Bills,  156.  But  this  may  be  done  without  inserting  the  name;  for 
that  is  certain  which  may  be  rendered  certain;  and  if  the  payee  be 
60  certainly  described  or  referred  to  as  to  be  easily  ascertained  by 
allegations  and  proofs,  the  promise  will  be  valid.^  The  declaration 
avers  that  plaintiffs  were  "  administrators  of  Abner  Chase,  deceased," 
at  the  time  these  promises  were  made,  and  that  they  were  made  to 
them  personally  by  that  designation  and  description.  These  are 
traversable  allegations,  and  must  be  denied  under  oath,  by  our 
statute,  as  settled  in  Frye  v.  Menkins,  15  111.  339.  The  same  rule 
was  applied  in  ascertaining  the  promisors  in  Dwight  v.  Newell, 
15  111.  333.  They  have  not  sued  as  administrators,  and  it  was 
therefore  unnecessary  to  aver  that  they  were  administrators  at  the 
time  this  action  was  commenced.  The  demurrer  admits  the  promise 
to  be  to  defendants  personally,  by  a  descriptive  phraseology. 

The  case  referred  to  in  Breese,  2,  was  ruled  upon  the  ground  that 
there  was  no  payee,  and  that  in  Breese,  155,  was  upon  the  same 
ground.  The  case  of  Berry  v.  Hawh^,  1  Scam.  468,  was  put  upon 
the  ground  of  a  want  of  power  in  a  county  treasurer  to  take  under 
such  a  promise. 

The  cases  in  15  111.  are  decisive  of  this,  in  principle.  The  judg- 
ment must  therefore  be 

Affiryned.^ 


AEMSTEONG   v.   NATIONAL   BANK. 

Supreme  Court  of  Ohio,  January,  1889.     46  Ohio  State,  512. 

Or  to  bearer,  in  terms  or  by  implication  of  law  ;  e.  g.  to  the  order  of  a  fictitious  or 
non-existing  person,  such  fact  being  known  to  the  promisor.^ 

Action  to  recover  the  balance  of  a  deposit  made  by  the  plaintiff  in 
the  defendant  bank, 

»  N.  I.  L.  §  25. 

2  Cf.  Shaw  V.  Smith,  1 50  Mass.  1 36,  in  which  a  note  payable  to  "  F.  B.  B.'s  estate 

or  order  "  was  held  to  be  negotiable. 

3  N.  I.  L.  §  26. 


56  FORM   AND   REQUISITES. 

The  plaintiff  purchased  of  one  Grimes,  a  promissory  note,  purport- 
ing to  be  signed  by  one  William  Brown,  and  gave  in  payment  there- 
for, a  cheque  on  the  defendant  bank,  payable  to  "  William  Brown  or 
order."  There  was  no  such  person  as  William  Brown.  Grimes  in- 
dorsed the  cheque,  "  William  Brown,"  added  his  own  indorsement, 
and  presented  it  to  the  bank,  which  paid  the  amount  thereof  to 
Grimes. 

The  plaintiff  had  judgment  in  the  Court  of  Common  Pleas,  which 
judgment  was  reversed  by  the  Circuit  Court,  and  the  plaintiff  brought 
writ  of  error. 

[Argument  reported.] 

MiNSHALL,  C.  J.  ...  By  the  fraud  of  one  Grimes  the  plaintiff 
was  induced  to  purchase  a  note  that  had  no  real  existence  as  a  secur- 
ity. She  is  found  by  the  court  to  have  been  ordinarily  careful  and 
prudent  in  the  transaction,  but  was  deceived.  She  supposed  that  she 
was  purchasing  a  valid  security  belonging  to  a  man,  as  represented 
by  Grimes,  by  the  name  of  William  Brown,  and  for  whom,  as  he 
represented,  he  was  acting  as  agent,  and  gave  to  the  assumed  agent 
for  Brown  a  cheque  for  the  amount,  payable  to  Brown  or  his  order. 
Now  it  is  evident,  both  upon  reason  and  the  authority  of  the  previ- 
ous decisions,  that  the  circumstances  under  which  the  plaintiff  was 
induced  to  give  the  cheque,  even  though  calculated  to  arouse  sus- 
picion on  her  part,  cannot  modify  the  duty  required  of  the  bank  in 
the  matter  of  papng  or  not  paying  the  cheque.  It  is  not  claimed 
that  the  bank  had  any  knowledge  of  how  or  under  what  circum- 
stances Grimes  had  obtained  the  cheque,  and  there  is  no  finding  of 
any  such  course  of  dealing  between  the  bank  and  the  plaintiff  as 
would  have  authorized  it  to  depart  from  the  general  duty  of  a  bank 
in  paying  the  cheques  of  its  customers,  drawn  payable  to  a  certain 
person  or -order.  It  was  its  duty  to  pay  to  the  person  named  or  his 
order,  and  to  withhold  payment  until  it  was  satisfied,  both  as  to  the 
identity  of  the  payee  and  the  genuineness  of  his  signature.  Morse 
on  Banking,  §  474;  Eobarts  v.  Tucker,  16  Q.  B.  560,  per  Maule,  J., 
at  p.  578. 

It  is  found  that  the  bank  made  the  usual  inquiries  respecting  the 
identity  of  Grimes,  and  in  other  respects  was  ordinarily  careful  and 
prudent  in  relation  to  the  transaction ;  but  this  must  be  taken  in 
connection  with  the  further  fact  that  Grimes  was  not  the  payee  of 
the  cheque,  and  that  his  indorsement,  without  the  genuine  indorse- 
ment of  the  payee,  could  confer  no  title  upon  the  holder  of  the 
cheque,  or  any  interest  in  it,  as  against  the  drawer.  .  .  .  The  in- 
dorsement on  the  cheque,  purporting  to  be  that  of  the  payee.  Brown, 
had  been  placed  there  by  Grimes,  and  was  either  a  forgery  or  a 
fraud,  and,  for  the  purposes  of  this  case,  it  is  not  material  which  it 


ARMSTRONG  V.   NATIONAL  BANK.  57 

is  termed.  As  to  it  the  bank  acted  upon  the  representations  of 
Grimes,  and  did  not  otherwise  know  whether  it  was  genuine  or  not. 
As  said  in  Dodge  v.  The  Bank,  30  Ohio  St.  1 :  "  The  rightful  posses- 
sion of  a  cheque  by  no  means  carries  with  it  or  implies  a  right  to 
demand  or  receive  payment  of  it,  without  the  genuine  indorsement 
of  the  person  to  whose  order  it  is  made  payable ; "  and  if  a  banker 
accept  or  undertake  to  pay  a  cheque,  "  he  must  see  to  it,  at  his  peril, 
that  he  pays  according  to  the  terms  of  the  order,  and  to  tlie  party 
named  therein,  or  to  one  holding  it  under  the  genuine  indorsement 
of  such  payee.  .  .  .  And  this  is  true,  whether  the  defendant  exer- 
cised the  degree  of  caution  which  bankers  usually  do  in  such  cases, 
or  not.  The  question  is,  was  the  cheque  paid  to  the  party  to  whom, 
by  its  terms,  it  was  made  payable?"  Therefore,  the  court  rightly 
concluded,  as  a  question  of  law  from  the  facts  found,  that  the  pay- 
ment of  the  cheque  by  the  defendant  was  not  authorized  by  the 
plaintiff,  and  that  it  could  not  rightly  be  charged  to  her  account. 

The  fact  that  the  cheque  was  made  payable  to  a  person  that  had 
no  existence  does  not  alter  the  rights  of  the  plaintiff  as  against  the 
bank,  for  she  supposed  that  Brown  was  a  real  person,  and  intended 
that  payment  should  be  made  to  such  person.  The  doctrine  that 
treats  a  cheque  or  bill  made  payable  to  a  fictitious  person,  as  one 
made  payable  to  bearer,  and  so  negotiable  without  indorsement, 
applies  only  where  it  is  so  drawn  with  the  knowledge  of  the  par- 
ties. .  .  .  Minet  v.  Gibson,  3  T.  E.  481;  s.  c.  in  the  House  of  Lords 
on  error,  Gibson  v.  Minet,  1  H.  Bl.  569.  .  .  .  The  doctrine  that  a  bill 
payable  to  a  fictitious  person  or  order,  is  equivalent  to  one  payable 
to  bearer,  had  its  origin  in  these  cases,  which  all  grew  out  of  bills 
drawn  by  Levisay  &  Co.,  bankrupts,  payable  to  a  fictitious  person 
or  order,  and  were  accepted  by  Gibson  &  Co. ;  but  it  will  be  noticed 
that  the  holding  in  each  case  was  upon  the  express  ground,  that  the 
acceptor  knew  at  the  time  of  his  acceptance  that  the  bill  was  payable 
to  a  fictitious  person,  and  but  for  this  fact  the  fictitious  indorsement 
would  have  been  held  to  be  a  forgery  —  some  of  the  judges  express- 
ing a  doubt  whether  it  was  not  so,  although  its  character  was  known 
to  the  acceptor.  3  T.  E.  481.  These  cases  will  be  found  reviewed 
in  a  note  to  Bennett  v.  Farrell,  1  Campb.  130.  It  was  held  in  this 
case  that  a  bill  made  payable  to  a  fictitious  person  or  order^  is  neither 
payable  to  the  order  of  the  drawer  or  bearer,  but  is  completely  void. 
But  in  an  addendum  to  the  case,  at  page  180c  of  the  report,  Lord 
Ellenborough  observes  that  this  holding  must  be  taken  with  this 
qualification :  "  unless  it  can  be  shown  that  the  circumstance  of  the 
payee  being  a  fictitious  person  was  known  to  the  acceptor."  .  .  . 
Mr.  Daniel,  in  his  work  on  Negotiable  Instruments,  §  139,  states 
the  rule  to  be  general,  but,  as  shown  by  Mr.  Eandolph,  the  cases  do 
not  bear  out  the  text.  1  Band.  Com.  Paper,  §  164,  note  (4).  And 
upon  principle  we  do  not  see  how  the  law  could  be  held  to  be  other- 


58  FORM  AND   KEQUISITES. 

wise.  For  if  the  fictitious  character  of  the  payee  is  unknown  to  the 
drawer,  whoever  indorses  the  paper  in  that  name  with  intent  to 
defraud,  perpetrates  a  forgery,  and  the  indorsement  is  void,  a  gen- 
eral intent  to  defraud  being  sufficient  to  constitute  the  offence. 

The  case  of  Lane  v.  Krekle,  22  Iowa,  399,  is  not  in  point,  for 
there  the  note  was  made  payable  to  a  fictitious  person  "  or  bearer," 
and  passed  by  delivery  without  indorsement.  The  case  of  Phillips 
V.  Im  Thurn,  114  Eng.  C.  L.  694,  cited  by  the  learned  Judge,  is 
clearly  distinguishable  from  the  case  before  us.  There  the  signature 
of  the  drawer,  as  well  as  the  indorsement,  was  a  forgery;  but  the 
defendant,  the  acceptor,  was  held  liable  because  the  plaintiff  dis- 
counted the  paper,  relying  in  good  faith  upon  the  acceptance  of  the 
defendant.  The  case  was  finally  disposed  of  on  a  case  stated,  re- 
ported in  1  Law  Eep.  C.  P.  463.  The  ground  of  the  decision  appears 
from  the  following  observations  of  Keating,  J.,  p.  472 :  "  I  think, 
upon  the  facts  stated  in  this  special  case,  that  it  was  not  competent 
to  the  defendant  to  deny  the  genuineness  of  this  bill.  He  knew  that 
the  plaintiffs  were  willing  to  advance  money  upon  the  bill  only  upon 
his  vouching  by  his  acceptance  of  it  the  authenticity  of  the  drawing. 
His  acceptance  amounted  to  a  representation  to  the  plaintiffs,  which 
enabled  the  person  representing  Plana  to  obtain  money  from  the 
plaintiffs  on  the  bill."  The  decision  in  this  case  simply  followed  a 
well  recognized  principle  in  the  law  of  notes  and  bills.  It  is  thus 
stated  by  Mr.  Smith :  "  Though  the  drawer's  signature  be  forged, 
the  drawee,  if  he  accepts  the  bill,  is  bound  to  pay  it,  provided  it  be 
in  the  hands  of  a  holder  bona  fide  and  for  value,  for  the  drawee's 
acceptance  admits  the  drawer's  handwriting  to  be  genuine."  Smith's 
!Mercantile  Law,  334.  Now,  Mrs.  Armstrong  can  in  no  way  be  said 
to  have  affirmed  by  any  act  of  hers  that  the  indorsement  upon  the 
cheque  was  genuine,  for  there  was  no  indorsement  on  it  when  it  left 
her  hands.  ,  .  . 

If  the  drawer  of  a  cheque,  acting  in  good  faith,  makes  it  payable 
to  a  certain  person  or  order,  supposing  there  is  such  person,  when  in 
fact  there  is  none,  no  good  reason  can  be  perceived  why  the  banker 
should  be  excused  if  he  pay  the  cheque  to  a  fraudulent  holder  upon 
any  less  precautions  than  if  it  had  been  made  payable  to  a  real 
person;  in  other  words,  why  he  should  not  be  required  to  use  the 
same  precautions  in  the  one  case  as  in  the  other;  that  is,  determine 
whether  the  indorsement  is  a  genuine  one  or  not.  That  fact  that 
the  payee  is  a  non-existing  person  does  not  increase  the  liability  of 
the  bank  to  be  deceived  by  the  indorsement.  The  fact  is  that  an 
ordinarily  prudent  banker  would  be  less  liable  to  be  deceived  into 
a  mistaken  payment  by  a  fictitious  indorsement  such  as  this  was, 
than  by  a  simple  forgery.  The  determination  of  the  character  of 
any  indorsement  involves  the  ascertainment  of  two  things:  (1)  the 
identity  of  the  indorser,  and  (2)  the  genuineness  of  his  signature; 


ARMSTRONG  V.   NATIONAL   BANK.  59 

and  no  careful  banker  would  pay  upon  the  faith  of  the  genuineness 
of  any  name  until  he  had  fully  satisfied  himself  both  as  to  the  iden- 
tity of  the  person  and  the  genuineness  of  his  signature.  Now,  a 
careful  banker  may  be  deceived  as  to  the  signature  of  a  person  with 
whose  identity  he  may  be  familiar;  but  he  is  less  liable  to  be  de- 
ceived where  both  the  signature  and  the  person  whose  signature  it 
purports  to  be  are  unknown  to  him.  In  making  the  inquiry  required 
in  such  case  to  warrant  him  in  acting,  he  will  either  learn  that  there 
is  no  such  person,  or  that  no  credible  information  can  be  obtained 
as  to  his  existence,  which,  with  an  ordinarily  prudent  banker,  would 
be  the  same  as  actual  knowledge  that  there  is  no  such  person,  and 
he  would  withhold  payment,  as  he  would  have  the  right  to  do  in  such 
case.  But  still,  if  he  should  be  deceived  as  to  the  existence  of  the 
person,  he  would,  nevertheless,  require  to  be  satisfied  as  to  the  gen- 
uineness of  the  signature.  Of  this,  however,  he  could  not  be  through 
his  skill  in  such  matters,  and  on  which  bankers  ordinarily  rely,  for 
he  would  be  without  any  standard  of  comparison,  and  he  could  have 
no  knowledge  of  the  handwriting  of  the  supposed  person,  for  there 
is  no  such  person.  So  that,  if  he  acts  at  all,  it  must  be  upon  the 
confidence  he  may  place  in  the  knowledge  of  some  other  person; 
and  if  he  choose  to  act  upon  this,  and  make,  instead  of  withholding, 
payment,  he  acts  at  his  peril  and  must  sustain  whatever  loss  may 
ensue.  .  .  . 

The  case  of  Vagliano  Brothers  v.  The  Bank  of  England,  recently 
decided  in  England  by  the  Court  of  Appeal,  23  Q.  B.  D.  243,  and 
called  to  my  attention  since  the  above  opinion  was  written,  fully 
supports  the  conclusion  we  have  reached.^ 

Judgment  of  the  Circuit  Court  reversed,  and  that  of  the  Common 
Pleas  Affirmed. 

1  This  case  afterwards  went  to  the  House  of  Lords,  where  the  decision  of  the  Court 
of  Appeals  was  reversed.  See  L.  R.  1891,  A.  C.  107.  The  case  was  decided,  however, 
upon  the  Bills  of  Exchange  Act,  §  7  (3),  which  provides  that  "  where  the  payee  is  a 
fictitious  or  non-existing  person,  the  bill  may  be  treated  as  payable  to  bearer. "  C£. 
N.  I.  L.  §  26,  3  ;  and  see  Bigelow,  Bills  and  Notes,  26. 


60  maker's  contract. 


CHAPTER  IV. 

maker's  contract. 


[There  is  no  doctrine  of  undisclosed  principals  in  the  law  mer- 
chant touching  negotiable  instruments.^] 

SLAWSON   V.   LORING. 

Supreme  Court  of  Massachusetts,  November,  1802.    5  Allen,  340. 

A  person  acting  as  a  representative  may  bind  his  constituent,  if,  having  authority, 
he  discloses  the  constituent  and  uses  apt  words  to  make  the  promise  that  of  the  con- 
stituent ;  2  descriptive  words  will  not  have  this  effect." 

Contract  against  the  acceptor  of  two  drafts,  the  first  of  which 
was  in  form  and  appearance  as  follows,  the  written  portion  being 
here  printed  in  italics: 

"  No.  40.       Office  of  Portage  Lake  Manufacturing  Company, 

Hancock,  Mich.,  June  5th,  1861. 
E.  T.  LoRiNG,  Agent, 
S9  State  St.,  Boston, 
At  Four  Months  sight,  pay  to  the  order  of  F.  H. 

Slawson  Four  Hundred  Dollars,  and  charge  the 

same  to  account  of  this  company. 

$400.  /.  R-  JacTcson,  Agt." 

(Written  across  the  face  of  the  draft,)  "Accepted  June  15,  E.  T. 
Loring,  Agent."     (Indorsed,)  "Pay  to  the  order  of  Mary  M.  Slaw- 

NoTE.  —  The  term  "  representative  "  is  used  here  to  include  all  those  who 
act  for  another,  and  the  correlative  term,  "constituent,"  to  include  all  those 
for  whom  another  acts.  Representatives  are  then  considered  as  of  two  classes : 
first,  those  who  may  possibly  have  authority  to  act  for  another,  e.  g.  agents  in 
the  strict  sense;  and  second,  those  who  may  not  bind  their  constituents,  e.  g. 
cases  in  which  there  is  no  possible  authority  to  bind  the  constituent  on 
negotiable  instruments,  such  as  trustees,  guardians,  and  executors  or  adminis- 
trators. 

1  N.  I.  L.  §  35.  «  Id.  §  37. 

•  Tucker  Mfg.  Co.  r.  Fairbanks,  98  Mass.  101,  in  which  the  signature  "D.  F.  & 
Co.,  Agts.  Piscataqua  F.  &  M.  Ins.  Co.,"  was  held  to  bind  D.  F.  &  Co.  personallj. 


SLAWSON   V.   LORING.  61 

son,  I.  H.  Slawson.  Pay  to  Dupee,  Beck  &  Sayles  or  order,  Mary  M. 
Slawson.    Without  recourse  to  Dupee,  Beck  &  Sayles." 

The  second  draft  was  for  $1034,  dated  the  same  day,  and  pre- 
cisely similar  in  other  respects  to  the  first. 

It  was  agreed  in  the  Superior  Court  that  the  drafts  were  duly 
presented  to  and  accepted  by  the  defendant,  as  appears  upon  them, 
and  that  payment  was  refused  at  their  maturity.  It  was  also  agreed, 
subject  to  the  right  of  either  party  to  object  to  the  competency  of 
the  facts,  that  I.  K.  Jackson  and  others  composed  a  firm  doing 
business  at  Hancock,  Michigan,  under  the  name  of  the  "  Portage 
Lake  Manufacturing  Company,"  of  which  the  defendant  was  not 
a  member.  Jackson  was  agent  of  this  firm  at  Hancock,  and  the 
defendant  was  agent  of  the  same  firm  at  Boston,  and  these  facts 
were  known  to  the  payee  at  the  time  the  drafts  were  drawn.  Mary  M. 
Slawson,  the  second  indorser,  was  the  wife  of  I.  H.  Slawson,  the 
payee,  and  at  the  time  of  her  indorsements  lived  with  her  husband 
in  Michigan,  and  there  placed  her  name  upon  the  drafts  by  his 
direction,  she  having  no  interest  in  them,  and  he  delivered  them  to 
the  plaintiff  for  a  valuable  consideration,  the  direction  to  pay  to 
Dupee,  Beck,  &  Sayles  being  for  the  convenience  of  the  plaintiff. 
The  drafts  were  presented  to  the  defendant  for  acceptance  at  the 
request  of  the  plaintiff,  after  the  indorsements  thereon  by  Mary  M. 
Slawson,  the  plaintiff  knowing  that  she  was  the  wife  of  I.  H.  Slaw- 
son, and  that  the  defendant  was  the  agent  at  Boston  of  the  said 
company. 

Upon  these  facts,  judgment  was  rendered  in  the  Superior  Court 
for  the  defendant,  and  the  plaintiff  appealed  to  this  court. 

[Argument  not  reported.] 

BiGELOW,  C.  J.  The  plaintiff  shows  a  good  title  to  the  drafts. 
It  is  true  that  the  payee,  by  his  indorsement  and  delivery  of  them 
to  his  wife,  vested  the  property  in  her;  but  they  were  choses  in 
action  the  possession  and  control  of  which  he  might  at  any  time 
during  coverture  resume.  This  he  did  by  procuring  her  indorsement 
thereon,  taking  them  into  his  own  hands  again,  and  passing  them 
over  to  the  plaintiff.  Her  indorsement,  having  been  made  by  his 
authority  and  assent,  was  sufficient  to  vest  the  title  in  her  indorsee. 
Stevens  v.  Beals,  10  Cush.  291 ;   Allen  v.  Wilkins,  3  Allen,  321. 

The  only  other  question  arising  on  the  agreed  statement  of  facts 
is,  whether  the  defendant  is  liable  as  acceptor  of  the  drafts.  This 
depends  exclusively  on  the  fair  result  of  the  inspection  of  the  drafts 
themselves,  that  is,  whether  on  the  instruments  as  they  appear,  it 
can  be  reasonably  inferred  that  the  acceptor  disclosed  his  principal, 
and  that  the  intent  was  to  bind  the  principal  and  not  himself.  Being 
•negotiable  paper,  all  evidence  dehors  the  drafts  is  to  be  excluded.    It 


62  maker's  contkact. 

is  wholly  immaterial,  therefore,  that  the  defendant  was  in  fact  the 
agent  of  the  company  named  on  the  face  on  [of]  the  drafts,  that  the 
plaintiff  knew  that  he  was  so,  and  that  tlie  defendant  had  no  per- 
sonal interest  in  the  company.  Fuller  v.  Hooper,  3  Gray,  334,  341; 
Bank  of  British  North  America  v.  Hooper,  5  Gray,  567 ;  Draper  v. 
Massachusetts  Steam  Heating  Co.,  5  Allen,  338.  The  rule  excluding 
all  parol  evidence  to  charge  any  person  as  principal,  not  disclosed 
on  the  face  of  a  note  or  draft,  rests  on  the  principle  that  each  person 
who  takes  negotiable  paper  makes  a  contract  with  the  parties  on  the 
face  of  the  instrument,  and  with  no  other  person. 

Taking  the  signature  of  the  defendant  as  acceptor,  written  across 
the  face  of  the  drafts,  by  itself,  without  reference  to  other  parts  of 
the  instruments,  it  is  clear  that  it  would  bind  him  personally.  It 
discloses  no  principal,  nor  is  it  in  a  form  which  would  exclude  the 
personal  liability  of  the  acceptor.  It  is  equivalent  to  this  promise: 
"  Having  funds  of  the  drawers  in  my  hands,  I  hereb}'  agree  to  pay 
the  amount  of  the  drafts  at  maturity."  The  addition  of  the  word 
agent  to  his  name  is  not  sufficient  to  exempt  a  party  from  liability 
on  such  a  contract.  It  is  a  mere  descriptio  personce,  designed  to 
indicate  the  fund  to  which  the  money  is  to  be  charged,  or  the  use 
to  which  it  is  to  be  appropriated.  This  is  clear  on  the  authorities. 
Forster  v.  Fuller,  6  Mass.  58;  Thacher  v.  Dinsmore,  5  Mass.  299; 
DeWitt  V.  Walton,  5  Selden,  571;  Seaver  v.  Coburn,  10  Gush.  324; 
Fiske  V.  Eldridge,  12  Gray,  474;  Haverhill  Ins.  Co.  v.  Newhall, 
1  Allen,  130;   Mare  v.  Charles,  5  El.  &  Bl.  978. 

We  are,  then,  to  look  at  other  parts  of  the  instruments  to  see 
whether  there  is  anything  to  indicate  that  the  acceptor  signed  as 
agent  for  a  principal  who  by  reasonable  intendment  can  be  held  to 
have  been  disclosed  to  the  purchaser  of  the  drafts.  The  first  and 
most  obvious  conclusion  which  is  to  be  drawn  from  the  form  of  the 
bills  is,  that  the  drawer  signs  his  name  as  agent  of  the  company 
named  therein,  and  that  they  are  intended  as  drafts,  not  of  the  agent 
personally  on  his  own  funds  in  the  hands  of  the  drawee,  but  as  those 
of  the  principals  acting  through  their  agent  on  funds  belonging  to 
the  company.  This  appears  clearly  from  the  fact  that  the  bills  bear 
date  at  the  office  of  the  company  in  Hancock,  Michigan,  and  direct 
the  drawee  to  charge  the  amount  of  them  "  to  the  account  of  this 
company,"  the  drawer  signing  his  name  after  these  words.  No  one 
can  doubt  that  on  bills  thus  drawn  the  agent  fully  discloses  his 
principal,  and  that  the  drawer  could  not  be  personally  chargeable 
thereon.  So  far  as  the  liability  of  the  drawer  is  concerned,  the  case 
is  not  unlike  that  of  Fuller  v.  Hooper,  already  cited.  This  con- 
struction of  the  instruments  declared  on  is  not  without  its  bearing 
on  the  liability  of  the  drawee.  It  gives  full  effect  to  the  forms  of 
the  bills,  to  the  fact  that  they  are  dra^\Ti  on  blank  printed  forms 
manifestly  prepared  for  the  use  of  the  company,  and  that  they  are 


SLAWSON  V.  LORING.  63 

dated  at  the  office  of  the  company  in  the  place  where  their  business 
is  chiefly  carried  on.  These  circumstances  have  reference  to  the 
capacity  in  which  the  bills  were  signed  by  the  drawer.  It  is  his 
language  which  they  speak,  and  they  show  his  intent  to  disclose  the 
principals  for  whom  he  acted  as  agent  in  making  the  drafts.  So 
much,  then,  of  the  language  of  the  instruments  is  appropriated  and 
exhausted  in  qualifying  the  liability  of  the  drawer.  It  is  difficult 
to  see  how  they  can  be  again  applied  in  giving  an  interpretation  to 
the  instrument  which  shall  also  absolve  the  drawee  to  whom  they 
were  addressed,  on  his  separate  and  distinct  contract  as  acceptor. 
They  can  have  no  meaning  beyond  that  which  they  plainly  import, 
namely,  an  order  by  the  company  through  their  agent  to  pay  to  the 
holder  a  certain  amount  of  money.  What,  then,  is  left  on  the  face 
of  the  drafts  to  show  that  the  defendant  is  not  liable  as  acceptor. 
Nothing,  except  the  single  circumstance  that  the  address  to  him  as 
drawee  is  printed  in  large  capital  letters  at  the  top  of  the  bills, 
between  the  date  and  the  body  of  the  instrument,  with  the  addition 
thereto  of  the  word  "  agent."  This,  certainly,  does  not  necessarily 
or  even  prima  facie  indicate  that  he  is  the  agent  of  the  drawers.  It 
is,  to  say  the  least,  equally  consistent  with  the  idea  that  he  is  the 
agent  of  some  third  person  not  named  on  the  face  of  the  bill.  Nor 
can  we  give  any  great  effect  to  the  fact  that  the  defendant's  name 
as  drawee  is  printed  as  part  of  the  blank  used  by  the  company.  A 
draft  or  bill  in  like  form  might  be  used,  if  their  course  of  business 
was  to  deal  with  him  as  the  agent  of  some  other  person  or  company. 
"We  are  unable  to  see,  therefore,  that  there  is  anything  on  the  face 
of  the  bills,  which,  fairly  interpreted,  discloses  any  principal  for 
whom  the  defendant  acted  in  accepting  the  bill,  whereby  he  can  be 
absolved  from  personal  liability  thereon. 

But  there  is  another  and  broader  view  of  the  contract  into  which 
the  parties  entered,  which  is  strongly  indicative  of  an  intent  by  the 
defendant  to  be  bound  by  his  acceptance.  The  instruments  declared 
on  purport  to  be  bills  of  exchange,  having  a  drawer  and  acceptor. 
By  putting  their  contract  in  such  form,  the  intention  of  the  parties 
must  have  been  to  issue  paper  which  should  be  received  by  those  who 
took  it  in  the  usual  course  of  business,  according  to  the  legal  and 
ordinary  effect  which  such  form  imports,  as  giving  to  the  holder  the 
security  of  the  names  of  the  parties.  Otherwise,  if  they  intended  to 
bind  one  party  only,  it  is  reasonable  to  suppose  that  bills  would  have 
been  drawn  by  the  company  on  itself,  in  which  case  the  direction 
and  request  to  pay  would  have  been  on  the  company  by  its  name, 
and  not  upon  an  individual  described  only  as  an  agent.  The  argu- 
ment urged  in  support  of  the  defence  would  pervert  the  bills  into 
a  contract  different  from  that  which  they  import  on  their  face.  If 
they  should  be  construed  to  be  drafts  by  the  company  on  itself,  they 
would  be  in  legal  effect  merely  promissory  notes  on  which  the  holder 


64  maker's  contract. 

would  have  only  the  security  of  one  name,  which  would  be  contrary 
to  the  intent  and  purport  of  the  instruments.  The  early  case  of 
Thomas  v.  Bishop,  2  Stra.  955,  and  Rep.  Temp.  Hardw.  1,  cited  with 
approval  by  this  court  in  Taber  v.  Cannon,  8  Met.  456,  460,  is  strik- 
ingly like  the  case  at  bar.  It  was  the  case  of  a  draft  drawn  by  a 
company  addressed  to  their  cashier,  who  was  a  servant  in  the  em- 
ployment of  the  company.  It  was  accepted  by  him,  and  he  was  held 
personally  liable  on  the  draft. 

Judgment  for  the  plaintiff. 


BALLOU   V.   TALBOT. 

Supreme  Court  of  Massachusetts,  October,  1820.     16  Mass.  461. 

If  the  act  is  unauthorized,  the  representative's  liability,  if  any,  is  at  common  law ; 
no  one  is  liable  on  the  instrument. 

The  declaration  was  "in  a  plea  of  the  case,  for  that  the  said 
Talbot,  at  etc.  on  etc.  by  his  note  of  that  date,  by  him  subscribed, 
for  value  received,  promised  the  plaintiff  to  pay  him  or  his  order 
380  dollars  on  demand  with  interest,"  etc. 

Trial  on  the  general  issue  in  May  last  before  Jackson,  J.,  at 
Taunton.  The  note  produced  was  signed  by  the  defendant;  and 
after  his  name  were  added  the  words,  "  agent  for  David  Perry." 
The  defendant  objected  that  this  evidence  did  not  comport  with  the 
declaration.  The  plaintiff  offered  to  prove  that  the  defendant  was 
not  authorized  to  make  the  note  as  agent  for  Perry.  The  defendant 
contended  that,  if  that  was  the  fact,  still  the  plaintiff  could  not 
recover  in  this  action;  and  that  he  should  have  brought  a  special 
action  on  the  case,  setting  forth  that  the  defendant  undertook  to  act 
as  agent,  and  pretended  to  have  such  authority,  when  he  was  not 
authorized. 

The  judge  overruled  this  objection,  intending  to  reserve  the  ques- 
tion for  the  consideration  of  the  whole  court.  The  trial  proceeded, 
and  the  plaintiff  obtained  a  verdict  on  the  ground  that  the  defendant 
was  not  authorized  to  sign  the  note  as  agent  to  Perry. 

If,  in  the  opinion  of  the  court,  the  plaintiff  was  entitled  to  recover 
under  these  circumstances,  judgment  was  to  be  rendered  on  the 
verdict;  otherwise,  the  plaintiff  was  to  become  nonsuit;  or  such 
order  made  in  the  cause  as  to  the  court  should  seem  proper. 

[Argument  reported.] 

Parker,  C.  J.  The  question  in  this  case  is  not,  whether  the 
defendant  is  liable  for  having  undertaken  to  make  the  promise  for 
Perry,  but  whether  the  note  declared  on  is  the  note  of  the  defendant. 


BALLOU  V.  TALBOT.  65 

It  is  obvious  from  the  signature,  that  it  was  neither  given  nor 
received  as  the  defendant's  note.  It  is  found  by  the  jury  that  he 
had  no  authority  to  sign  it  for  Perry;  but  the  legal  inference  from 
this  fact  is,  not  that  it  became  his  promise  directly,  but  that  he  is 
answerable  in  damages  for  acting  without  authority.  What  is  stated 
in  the  case  of  Long  v.  Colburn,  11  Mass.  97,  as  an  intimation  of  the 
court,  was  undoubtedly  a  settled  opinion,  viz.  that  in  such  case,  a 
special  action  upon  the  case  would  be  the  proper  action. 

One  way,  and  perhaps  the  best  way,  to  ascertain  whether  a  party 
is  sued  in  the  right  form  of  action,  is  to  see  of  what  fact  the 
declaration  gives  him  notice,  and  whether  that  constitutes  substan- 
tially the  contract  to  which  he  is  called  to  answer.  In  the  case 
before  us  the  defendant  is  charged  with  having  made  a  promissory 
note  to  the  plaintiff.  The  evidence  produced  is  apparently  the  note 
of  another.  But  he  wrongfully  made  this  note  for  the  other.  This 
is  entirely  new  ground,  of  which  the  declaration  gave  him  no  notice, 
and  which  he  cannot  be  expected  to  be  prepared  to  answer. 

Besides,  if  the  note  is  to  be  considered  as  evidence  of  the  defend- 
ant's own  promise,  he  must  pay  according  to  the  tenor  of  it ;  whereas, 
if  he  were  sued  for  falsely  assuming  an  authority,  he  might  defend 
himself  by  showing  that  the  person  for  whom  he  assumed  to  act,  had 
afterwards  ratified  his  act;  or  that  he  had  otherwise  satisfied  the 
debt  for  which  the  note  was  given;  or  perhaps  he  might  show  that 
no  debt  was  due,  for  which  the  note  was  given;  or  that  he  had  au- 
thority to  make  it.  It  is,  in  short,  a  proper  subject  for  a  special 
action,  in  which  damages  will  be  recovered  according  to  the  injury 
sustained. 

In  the  cases  cited  by  the  plaintiff's  counsel,  the  parties  held  per- 
sonally liable  either  made  themselves  so  by  the  terms  of  the  con- 
tract, though  purporting  to  act  for  another;  or  they  acted  in  certain 
capacities,  in  which  they  had  no  right  to  bind  the  estate  of  those 
for  whom  they  undertook  to  act.  In  the  case  before  us  the  promise 
was  avowedly  made  by  the  defendant  for  Perry;  and  it  was  matter 
of  evidence,  extrinsic  to  the  contract,  whether  he  had  authority  or 
not.    The  verdict  is  set  aside,  and  the  plaintiff  must  be  called. 

Plaintiff  nonsuit. 

Note.  —  If  the  agent  has  disclosed  the  principal's  name  on  the  instrument, 
to  make  the  principal  liable  under  any  circumstances,  the  agent  must  have 
used  apt  words ;  if  he  has  merely  described  himself,  he  alone  will  be  liable. 
Bigelow,  Bills  and  Notes,  44. 

If  apt  words  have  been  used,  then  the  question  of  authority  becomes  mate- 
rial. All  courts  agree  that  if  the  agent  had  authority,  then  the  principal  alone 
is  liable ;  but  in  cases  in  which  the  pretended  agent  had  no  authority,  there  io 
a  conflict,  some  courts  following  the  rule  of  Ballou  r.  Talbot,  that  no  one  is 
liable  on  the  instrument  since  the  promise  cannot  be  that  of  the  alleged  prin- 
cipal, for  want  of  authority,  nor  that  of  the  professed  agent,  because  in  terms 
it  purports  to  be  that  of  another.     Bartlett  v.  Tucker,  104  Mass.  339;  West 

5 


&Q  maker's  contract. 

London  Bank  v.  Kitson,  12  Q.  B.  D.  157 ;  Taylor  v.  Shelton,  30  Coun.  122; 
Simpson  r.  Garland,  76  Me.  203 ;  Duncan  v.  Wells,  32  111.  542. 

Other  courts  hold  the  agent  liable  on  the  instrument  by  disregarding  the 
reference  to  the  alleged  principal.  In  Dusenbury  v.  Ellis,  3  Johnson's  Cases, 
70,  it  was  said,  "  If  a  person,  under  pretence  of  authority  from  another,  exe- 
cutes a  note  in  his  name,  he  is  bound,  and  the  name  of  the  person  for  whom 
lie  assumed  to  act  will  be  rejected  as  surplusage";  so  in  Pettingill  v, 
McGregor,  12  N.  H.  171,  191,  "  If  a  contract  entered  into  by  one  assuming  to 
act  as  agent  of  another,  but  who  had  not  the  requisite  authority,  when  stript 
of  what  the  agent  had  no  right  to  put  there,  still  contains  apt  words  to  charge 
the  agent  with  a  personal  obligation,  he  is  bound  to  the  performance  of  the 
contract."  See  also  Weare  v.  Gove,  44  N.  H.  191.  The  Statute  is  not  clear; 
N.  I.  L.  §  37  provides  that  "  where  the  instrument  contains,  or  a  person  adds 
to  his  signature,  words  indicating  that  he  signs  for  or  on  behalf  of  a  principal, 
or  in  a  representative  capacity,  he  is  not  liable  on  the  instrument,  if  he  was 
duly  authorized." 

The  possible  implication  is  that  if  the  person  so  signing  was  not  authorized 
he  would  be  liable  on  the  instrument.  It  is  very  doubtful,  however,  if  the 
courts  which  had  laid  down  the  rule  as  in  Ballou  r.  Talbot,  supra,  will  change 
that  rule,  following  a  mere  implication  of  the  Statute. 

Where  the  language  of  the  instrument,  stripped  of  that  which  the  pre- 
tended agent  had  no  authority  to  put  therein,  does  not  contain  apt  words  to 
bind  the  agent,  or  where  the  name  of  the  alleged  principal  alone  appears,  the 
f)retended  agent  cannot  be  held  liable  on  the  instrument.  Wood  v.  Wilson, 
26  X.  H.  332.  "Here  were  no  apt  words  to  bind  the  defendant.  It  is,  ia 
express  terms,  the  undertaking  of  '  the  Second  Methodist  E.  Society  in  Man- 
chester, N,  H.'  •  .  .  The  language  used  is  '  the  Second  Methodist  E.  Society 
promise  to  pay.'"  See  also  Clark  v.  Forster,  8  Vt.  98;  language  in  Pet- 
tingill r.  McGregor,  quoted  supra;  Wilson  v.  Barthrop,  2  M.  &  W.  863;  Pol- 
hill  V.  Walter,  3  B.  &  A.  114.  In  such  cases,  the  liability  of  the  pretended 
agent  in  all  jurisdictions  is  at  common  law,  in  deceit  or  in  warranty. 
Woodes  V.  Dennett,  9  N.  H.  55;  White  v.  Madison,  26  N.  Y.  117,  doubting 
Dusenbury  v.  Ellis,  supra,  and  similar  cases  ;  Miller  v.  Reynolds,  92  Huu,  400  ; 
Glark  V.  Forster,  supra ;  Bigelow,  Bills  and  Notes,  46. 


SHOE  &  LEATHER  NATIONAL  BANK  v.  DIX. 

Supreme  Court  of  Massachusetts,  September,  1877.     123  Mass.  148. 

And  though  the  constituent  is  not  disclosed,  the  representative  may  disclaim 
persoual  liability. 

■CoxTKACT.  The  defendants  made  the  following  promissory  note, 
which  was  indorsed  by  the  payees  to  the  plaintiff : 

*'  February  16,  1871,  $53,000.  For  value  received,  we  as  trustees 
but  not  individually  promise  to  pay  to  the  Boston  Water  Power 
Company  or  order  the  sum  of  fifty-three  thousand  dollars  in  five 
years  from  this  date,  with  interest  to  be  paid  semi-annually,  at  the 


SHOE   &  LEATHER  NATIONAL   BANK   V.   DIX.  67 

rate  of  seven  per  centum  per  annum,  during  said  term,  and  for 
such  further  time  as  said  principal  sum  or  any  part  thereof  shall 
remain  unpaid. 

_,.       ,   .  -  George  P.  Sanger,  i 

Signed  m  presence  of  j^^^^^  \Trusteesr 

P.  H.  Sears.  R.  a.  Ballou,  J 

"  Secured  by  mortgage  of  real  estate  in  Boston,"  by  the  defendants. 
The  question,  raised  on  agreed  facts  which  need  not  be  stated  here, 
was  whether  this  promissory  note  bound  the  makers  personally. 

[Argument  not  reported.] 

Ames,  J.  The  question  whether  the  defendants  have  made  them* 
selves  personally  responsible  must  be  determined  by  the  terms  of  the 
note  itself.  In  determining  the  proper  interpretation  of  any  written 
contract  the  court  will  give  full  effect  to  all  the  terms  in  which  it 
is  expressed.  Those  terms  will  not  be  modified  by  extrinsic  evidence 
tending  to  show  that  the  real  intention  of  the  parties  was  something 
different  from  what  the  language  imports.  They  will  be  taken  in 
their  plain,  ordinary,  and  popular  sense,  except  where  it  may  be 
qualified  by  some  special  usage,  or  where  the  context  evidently  shows 
that  the  parties  in  some  particular  case  had  a  different  intent.  It 
is  no  part  of  the  business  of  the  court  to  make  or  alter  a  contract 
for  the  parties.  Even  if  it  be  found  that  the  contract,  according  to 
its  true  meaning,  has  no  legal  validity,  or  fails  to  become  operative, 
it  is  not  for  the  court,  in  order  to  give  it  operation,  to  suppose  a 
meaning  which  the  parties  have  not  expressed,  and  which  it  is  cer- 
tain they  did  not  entertain.  It  must  be  assumed  that  all  the  lan- 
guage used  in  the  contract  was  selected  with  some  purpose  and  is 
to  be  of  some  effect.  If  a  party,  therefore,  in  a  contract  into  which 
he  voluntarily  enters,  and  not  in  the  execution  of  any  official  trust 
or  duty,  makes  it  an  express  stipulation  that  he  is  acting  for  some- 
body else,  and  is  in  no  event  to  be  personally  liable,  he  certainly 
cannot  be  rendered  so  by  law.  Sedgwick,  J.,  in  Sumner  v.  Williams, 
8  Mass.  162,  184,  In  a  question  as  to  the  meaning  of  a  contract 
the  want  of  apt  words  to  create  a  personal  liability  is  not  to  be 
supplied  by  the  alteration  or  enlargement  of  its  terms. 

In  applying  these  familiar  and  elementary  rules  of  construction 
to  the  case  now  before  us  we  find  that  the  defendants  promised  "  as 
trustees  but  not  individually."  The  construction  contended  for  by 
the  plaintiffs  would  require  us  to  strike  out  the  words  "but  not 
individually;"  although  in  so  doing  we  should  not  only  alter  the 
contract,  but  should  impose  upon  them  a  liability  which  apparently 
they  took  special  pains  to  avoid. 

It  is  to  be  borne  in  mind  that  this  was  not  a  case  of  agents  acting 


68  maker's  contract. 

for  an  undisclosed  or  unknown  principal,  and  is  therefore  readily 
distinguishable  from  Winsor  v.  Griggs,  5  Cush.  210,  and  cases  of 
that  class.  Neither  was  it  an  attempt  by  the  defendants  to  bind 
property  over  which  they  had  no  legal  control.  By  the  terms  of  the 
deed  they  had  power  to  mortgage,  lease,  and  manage  the  property 
at  their  discretion,  but  for  the  benefit  and  on  the  account  of  the 
equitable  owners,  namely,  the  members  of  the  Brookline  Avenue 
Association.  In  this  respect  the  case  differs  from  Thacher  v.  Dins- 
more,  5  Mass.  299,  Forster  v.  Fuller,  6  Mass.  58,  and  other  cases  of 
that  class,  in  which  a  party  promising  "  as  guardian,"  etc.,  was  held 
to  have  made  himself  personally  liable. 

Neither  can  it  be  said  that  the  term  "trustees"  was  used  as  "a 
mere  description  of  the  general  relation  or  office  which  the  person 
signing  the  paper  holds  to  another  person  or  to  a  corporation,  with- 
out indicating  that  the  particular  signature  is  made  in  the  execution 
of  the  office  and  agency."  In  this  respect  the  case  differs  from 
Tucker  Manuf.  Co.  v.  Fairbanks,  98  Mass.  101.  It  often  has  hap- 
pened that  an  agent  for  another  person,  or  the  treasurer  of  a  corpo- 
ration, has  made  himself  personally  responsible  by  the  form  of 
words  in  which  he  has  expressed  himself  in  a  written  contract,  when 
he  may  have  intended  to  bind  his  principal  only.  Cases  in  which 
this  question  has  been  raised  have  often  been  before  this  and  other 
courts,  and  the  authorities  have  recently  been  collected  and  reviewed 
in  several  of  our  own  decisions.  See  Slawson  v.  Loring,  5  Allen, 
340;  Barlow  v.  Lee  Congregational  Society,  8  Allen,  460;  Tucker 
Manuf.  Co.  v.  Fairbanks,  uhi  supra.  But  we  believe  no  case  can  be 
found  in  which  a  promise  "  as  trustee,"  etc.,  accompanied  with  an 
express  disclaimer  of  personal  liability,  would  fail  to  exempt  him. 

It  is  contended  that  if  these  defendants  are  not  liable  upon  the 
contract  as  a  note,  then  nobody  is  liable.  Even  if  such  were  the 
fact,  it  would  not  be  in  the  power  of  the  court,  as  we  have  already 
Been,  to  alter  the  contract  for  the  purpose  of  giving  it  validity.  In 
deciding  whether  the  defendants  have  or  have  not  bound  themselves 
we  need  not  decide  whether  they  have  or  have  not  bound  their 
principals.  Abbey  v.  Chase,  6  Cush.  54.  But  even  if  the  written 
contract  should  fail  of  taking  effect  as  a  negotiable  note,  it  might 
still  be  operative  as  an  acknowledgment  of  unpaid  debt,  which  the 
mortgage  was  intended  to  secure.  It  may  be  that  this  was  all  that 
the  original  parties  intended  or  supposed  to  be  material.  They  may 
have  considered  the  mortgage  sufficient  security,  without  the  personal 
responsibility  of  the  trustees. 

Our  conclusion,  therefore,  is  that  without  proof  that  the  defend- 
ants, as  trustees,  have  funds  of  the  association  in  their  hands  ap- 
plicable to  this  debt,  no  actions  can  be  maintained  against  them. 
No  evidence  to  that  effect  having  been  offered,  we  must  order 

Judgment  for  the  defendants. 


GRAFTON  NATIONAL  BANK   V.  WING.  69 

GEAFTON  NATIONAL  BANK  v.   WING. 
GRAFTON  SAVINGS  BANK  v.    SAME. 

Supreme  Court  of  Massachusetts,  February,  1899.     172  Mass.  513;  52  N.  E. 

Rep.  1067. 

Where  there  is  no  possible  anthority,  the  constituent  cannot  be  bound;  quaere, 
whether  the  representative  will  be  liable  at  common  law,  where  the  promise  purports 
to  be  in  terms  that  of  the  constituent. 

Two  actions  of  contract  upon  promissory  notes.  The  first  of  the 
notes  in  the  first  case  was  as  follows : 

"  $2000.00.  Grafton,  February  1st,  1892.  Four  months  after  date 
we  promise  to  pay  to  the  order  of  ourselves  two  thousand  dollars  at 
Grafton  National  Bank.  Value  received.  Wheeler  Cotton  Mills, 
Henry  F.  Wing,  Treas'r." 

Indorsements : 

"Waiving  demand  and  notice.  Wheeler  Cotton  Mills,  Henry  F. 
Wing,  Treas.  Estate  of  Jona.  D.  Wheeler,  Henry  F.  Wing,  Executor." 

The  second  note  was  for  $3000,  and  was  otherwise  identical  with 
the  first  note,  except  that  it  was  dated  February  17,  1892. 

The  Grafton  Savings  Bank  was  the  payee  in  the  note  in  the  second 
case.    This  note  was  otherwise  like  the  note  supra. 

The  cases  were  tried  together  without  a  jury,  before  Hopkins,  J., 
who  allowed  a  bill  of  exceptions  in  substance  as  follows : 

Henry  F.  Wing  was  the  defendant's  intestate,  and  was  the  treas- 
urer of  the  Wheeler  Cotton  Mills,  and  also  executor  of  Jonathan 
D.  Wheeler's  will.  The  plaintiff  in  each  case  had  received  a  part 
payment  under  a  compromise  agreement  with  the  Wheeler  Cotton 
Mills,  and  the  plaintiffs  sought  to  hold  Henry  F.  Wing's  estate  on 
the  ground  that  he  was  personally  liable. 

George  K.  Nichols,  the  president  of  both  the  plaintiff  banks,  tes- 
tified for  the  plaintiff  that  prior  to  the  giving  of  the  notes,  which 
were  given  in  renewal  of  former  notes  similarly  indorsed,  and  which 
had  been  originally  indorsed  by  Jonathan  D.  Wheeler,  and  during  the 
life  of  the  notes  in  suit,  he  had  told  the  defendant's  intestate  that 
the  indorsements  bound  him  personally,  and  not  the  estate  of  Jona- 
than D.  Wheeler;  that  when  Wing  first  gave  them,  notes  indorsed 
by  the  Wheeler  estate  and  by  himself  as  executor,  they  questioned 
his  right  to  indorse  those  notes  in  that  way,  and  from  that  time 
constantly  took  that  position  toward  him;  that  Wing  said  he 
thought  he  had  the  right;  that  they  took  the  notes  with  Wing's 
indorsements,  feeling  that  he  was  good  for  them,  and  that  he  would 
be  holden  for  them;  that  he  was  told  so,  and  the  banks  consulted 
counsel  and  were  told  that  that  was  true,  and  they  told  Wing  what 
the  counsel  said ;  he  also  testified  that  the  indorsements  were  on  tha 
notes  at  their  inception. 


70  maker's  contract. 

The  defendant  requested  the  judge  to  rule  that  the  actions  could 
not  be  maintained.  The  judge  refused  so  to  rule,  and  found  for 
the  plaintiff  in  each  case;   and  the  defendant  alleged  exceptions. 

[Argument  not  reported.] 

Holmes,  J.  These  are  two  actions  of  contract  against  the  ad- 
ministrator of  the  estate  of  Henry  F.  Wing,  seeking  to  hold  him 
upon  two  indorsements  made  by  Henry  F.  Wing,  as  executor  of  the 
will  of  Jonathan  D.  Wheeler.  The  indorsements  were  in  the  follow- 
ing form :  "  Estate  of  Jona.  D.  Wheeler,  Henry  F.  Wing,  Executor." 

A  majority  of  the  court  are  of  opinion  that  these  words  mean 
"  Estate  of  Wheeler  by  Wing,"  and  therefore  that,  at  least,  they  failed 
to  bind  Wing  by  contract.  It  is  quite  true  that  the  law  does  not  know 
the  estate  of  a  dead  man  as  a  contractor,  and  that,  unless  the  fact 
that  these  indorsements  were  the  renewal  of  indorsements  by  Wheeler 
in  his  lifetime  makes  a  difference,  they  did  not  bind  the  estate. 
But  that  merely  shows  that  the  indorsements  were  made  by  Wing 
under  a  mistake  of  law,  as  the  testimony  also  proves  to  have  been  a 
fact.  But  the  presence  of  Wing's  name  upon  the  paper  and  his 
failure  to  bind  his  supposed  principal  are  not  enough  to  make  the 
contract  his  own.  Jefts  v.  York,  4  Cush.  371,  and  10  Cush.  392, 
395,  396;  Abbey  v.  Chase,  6  Cush.  54,  56,  57;  Taylor  v.  Shelton, 
30  Conn.  122.  If  a  man  does  not  purport  to  be  a  party  to  negoti- 
able paper,  he  is  not  a  party  to  it.  See  further  1  Dan.  ISTeg.  Instr. 
(4th  ed.)  §§  306,  307,  308;  Bartlett  v.  Tucker,  104  Mass.  336.  It 
is  true  that  it  is  suggested  by  Mr.  Daniel  that,  in  such  cases,  an 
ambiguous  expression  may  be  interpreted  to  bind  the  agent,  but 
neither  that  suggestion  nor  a  presumption  that  the  agent  knew  the 
law,  can  pervert  words  from  their  meaning  if  the  meaning  is  plain. 
The  so-called  presumption  is  a  requirement,  not  a  presumption  of 
fact,  and  has  no  bearing  or  weight  upon  the  construction  of 
instruments. 

We  are  of  opinion  that  the  court  should  have  ruled  that  the  de- 
fendant was  not  liable. 

Exceptions  sustained. 

Note.  —  In  cases  in  which  the  representative  cannot  bind  his  constituent, 
e.  g.  guardians,  executors,  and  trustees,  the  language  used  in  reference  to  the 
constituent  is  construed  as  descriptio  personce,  inserted  only  to  entitle  the  rep- 
resentative to  indemnity  as  against  his  constituent;  that  is,  in  cases  where 
the  form  of  the  promise  does  not  in  terms  purport  to  be  that  of  the  constit- 
uent.    Cf.  Thatcher  v.  Dinsmore,  5  Mass.  299  ;  Forster  v.  Fuller,  6  Mass.  58. 


SYLVESTER   V.  DOWNHR.  71 

[By  the  law  merchant,  the  payee  of  a  negotiable  instrument  must 
be  the  first  indorser.^] 

SYLVESTEE  v.  DOWNEE. 

Supreme  Court  of  Vermont,  March,  1848.     20  Vt.  355. 

In  some  jurisdictions,  if  a  third  person  indorses  in  blank  a  negotiable  promissory 
note,  before  delivery  to  the  payee,  he  is  prima  facie  a  co-maker ;  his  undertaking  is 
irregular  and  may  be  explained. 

Assumpsit.  The  plaintiff  declared  against  the  defendant  as 
maker  of  a  promissory  note  payable  to  Austin  &  Fay,  or  order,  and 
by  them  indorsed  to  the  plaintiff's  testator.  There  was  a  count  also 
for  money  had  and  received.    Plea,  the  general  issue. 

The  plaintiff  offered  in  evidence  a  promissory  note  for  $75,  pay- 
able to  Austin  &  Fay,  or  order,  with  the  following  indorsements: 
"  For  value  received  pay  the  contents  to  Lemuel  Sylvester.  Austin 
&  Fay."  "  For  value  received  I  promise  to  pay  this  note  according 
to  its  tenor  to  Lemuel  Sylvester.  Solomon  Dowmer."  To  this 
evidence  the  defendant  objected,  for  variance;  but  the  objection 
was  overruled.  The  indorsements  were  made  in  blank,  and  were 
filled  up  by  the  plaintiff  before  trial. 

The  plaintiff  produced  evidence  that  Austin  &  Fay  were  indebted 
to  Lemuel  Sylvester,  and  that  the  defendant  had  agreed  to  pay  the 
debt,  and  was  then  the  owner  of  the  note  in  suit;  that  the  defend- 
ant then  proposed  to  Lemuel  Sylvester  that  he  would  let  him  have 
the  note  in  part  payment  of  that  debt,  and  that  he,  the  defendant, 
"  would  make  it  good  to  him  by  putting  his  name  upon  the  back  of 
it,  and  Austin  &  Fay  should  do  the  same ; "  that  each  of  the  part- 
ners of  said  firm  was  then  sitting  at  the  same  table  with  the  de- 
fendant and  Lemuel  Sylvester,  and  that  Lemuel  then  agreed  to 
receive  the  note,  as  the  defendant  offered,  and  that  the  defendant 
wrote  his  name  upon  the  back  of  the  note  and  then  delivered  it  to 
Austin,  and  that  he  wrote  upon  it  the  name  of  the  firm,  and  that 
the  note  was  then  delivered  to  and  received  by  Lemuel  Sylvester  in 
part  payment  of  said  debt.    There  was  no  other  evidence  in  the  case. 

The  court  charged  the  jury  that  if  they  found  the  facts  as  testified, 
and  considered  from  the  evidence  that  the  defendant  intended,  by 
what  he  said  at  the  time  of  transferring  the  note  to  Lemuel  Syl- 
vester, to  assume  an  absolute  and  unconditional  undertaking  to  pay 
the  note  or  see  it  paid,  according  to  its  tenor,  they  should  return  a 
verdict  for  the  plaintiff.  Verdict  for  plaintiff.  Exceptions  by 
defendant. 

[Argument  reported.] 

1  Jenkins  v.  Coomber,  1898,  2  Q.  B.  168. 


72  maker's  contract. 

Redfield,  J.  This  is  an  action  in  common  form  against  the 
defendant  as  a  sole  maker  of  a  promissory  note.  The  note,  on 
being  produced,  showed  his  name  indorsed  upon  it,  and  also  that 
of  the  payees  of  the  note.  This,  according  to  the  decisions  of  this 
court,  repeatedly  made,  imposed  upon  the  defendant  the  obligation 
of  the  maker  of  the  note,  with  this  difference  only,  that,  his  under- 
taking being  in  blank,  as  between  the  parties  to  it,  it  was  susceptible 
of  being  controlled  by  oral  evidence  of  the  real  obligation  intended 
to  be  assumed  at  the  time  of  signing.  This  has  been  so  often  de- 
clared by  this  court  that  it  seems  needless  to  refer  to  the  decisions. 
But  I  will  advert  to  some  of  them  with  a  view  to  extract  from  them 
the  principle  of  the  decisions. 

The  first  case  which  distinctly  assumed  this  ground  is  that  of 
ICnapp  V.  Parker,  6  Vt.  642.  In  that  case  the  note  had  been  due 
before  it  was  indorsed  by  the  defendant,  and  he  was  sued  as  maker 
and  the  suit  sustained.  It  is  true  the  court,  in  their  opinion,  ad- 
vert to  a  prior  contract  resting  in  parol  merely;  but  this  was 
clearly  merged  in  the  writing.  It  was  of  no  importance  in  deter- 
mining the  prima  facie  legal  obligation  resulting  from  the  signature. 
The  law  determines  that;  and  the  oral  evidence  was  important  only 
as  tending  to  show  that  the  defendant  intended  to  assume  just  such 
an  obligation  as  he  did  by  the  blank  signature.  .  .  .  [Reviewing 
Flint  V.  Day,  9  Vt.  345 ;  Sanford  v.  Norton,  14  Vt.  228 ;  and  Strong 
V.  Riker,  16  Vt.  554.] 

But  what  this  court  has  repeatedly  held  upon  this  subject  is,  that 
he  who  writes  his  name  upon  the  back  of  a  note,  if  he  were  not  before 
a  party  to  it,  assumes  the  same  obligation  as  if  he  wrote  his  name 
upon  the  face  of  the  instrument ;  and  that,  although  he  do  this  long 
after  the  making  of  the  note,  it  shall  make  no  difference.  If  he 
consent  to  be  thus  bound,  and  induce  others  to  take  the  note  under 
that  expectation,  he  shall  be  estopped  to  deny  that  fact,  and  is  treated 
.to  all  intents  the  same  precisely  as  if  he  had  signed  the  note  in  its 
inception.  But  the  signature  being  blank,  he  may  undoubtedly  show 
that  he  was  not  understood  to  assume  any  such  obligation. 

But  the  proof  in  the  present  case  tended  to  show,  and  the  jury 
have  so  found,  that  the  defendant  did  intend  to  assume  an  uncon- 
ditional obligation  to  pay  the  note,  according  to  its  tenor.  This  puts 
at  rest  all  pretence  that  the  defendant  was  not  understood  to  assume 
the  common  obligation  which  his  signature  imported.  This  was  that 
of  the  maker  of  a  note  to  Austin  &  Fay,  as  that  was  the  form  of  the 
note  at  the  time  he  indorsed  it;  and  had  they  refused  to  indorse  it, 
the  defendant  might  have  been  sued  as  maker,  in  their  names,  ac- 
cording to  the  case  of  Strong  v.  Riker,  16  Vt.  554.  But  they  did 
indorse  it.  He  was  then  liable  as  maker  to  any  person  who  might 
become  a  holder  of  the  note,  and  especially  to  the  plaintiff's  testa- 
tor, for  he  assumed  the  obligation  with  the  understanding  that  the 


UNION  BANK   OF   WEYMOUTH   AND   BEAINTREE   V.   WILLIS.        73 

note  was  going  immediately  into  his  hands,  and  that  the  defendant 
was  liable  to  him.  This  point  is  fully  decided  by  Sanford  v.  Xorton, 
14  Vt.  228.  The  declaration  in  this  case  then  was  precisely  accord- 
ing to  the  proof,  —  that  the  defendant  made  a  note  to  Austin  &  Fay, 
which  was  indorsed  to  the  plaintiff's  testator.  .  .  .  [Competency  of 
a  witness.] 

The  fact  that  the  defendant's  indorsement  was  filled  up  differently 
from  the  declaration,  and  differently  from  the  import  of  his  under- 
taking, is  of  no  importance,  as  that  is  mere  form,  and  may  be  made 
at  any  time,  and  if  made  wrong  may  be  corrected  at  any  time.  It 
is  just  as  well  if  it  be  not  made  at  all. 

Judgment  affirmed. 


UNION"  BANK  OF  WEYMOUTH  AND  BEAINTEEE  v. 

WILLIS. 
Supreme  Court  of  Massachusetts,  October,  1844.     8  Met.  504. 
In  others,  he  is  deemed  conclusively  a  co-maker.^ 

Assumpsit  by  the  indorsees  against  the  indorser  of  a  promissory 
note  of  the  following  tenor:  "August  8,  1843.  For  value  received, 
I  promise  Tilley  Willis  to  pay  him,  or  order,  $350,  in  four  months 
from  date.  T.  D.  Thompson."  On  the  back  was  the  name  of  B.  L. 
Mirick  &  Co.,  and  under  that  name  was  the  name  of  the  defendant, 
both  indorsements  being  in  blank. 

At  the  trial  before  the  Chief  Justice,  the  plaintiffs'  cashier  testi- 
fied that  they  discounted  the  note  for  Thompson,  and  that,  when  it 
was  discounted,  the  names  stood  on  the  note  as  they  now  do.  There 
was  no  evidence  that  the  note  was  presented  to  Mirick  &  Co.  for 
payment;  but  there  was  evidence  tending  to  show  that  notice  of 
dishonor  was  given  to  them,  as  indorsers,  as  well  as  to  the  defendant. 

The  defendant  contended  that  Mirick  &  Co.  were  to  be  considered 
as  joint,  or  joint  and  several,  promisors,  and  that  the  defendant  was 
not  responsible  as  indorser,  without  proof  of  presentment  to  them  for 
payment.  But  it  was  ruled  that  they  were  not  to  be  so  considered 
as  promisors,  as  that  presentment  of  the  note  to  them,  and  demand 
of  payment  of  them,  were  necessary  to  charge  the  defendant.  A  ver- 
dict was  returned  for  the  plaintiffs,  which  is  to  be  set  aside,  and  a 
new  trial  granted,  if  the  ruling  was  incorrect. 

[Argument  not  reported.] 

Hubbard,  J.  It  is  admitted  that  the  note  was  not  presented  for 
payment  to  Mirick  &  Co. ;  and  the  question  is,  whether  the  omission 
to  do  it  discharges  the  indorser. 

1  Changed  by  the  N.  L  L.  §§  80,  81. 


74  maker's  contract. 

If  the  subject  now  brought  before  us  were  a  new  one,  we  should 
hesitate  in  giving  countenance  to  such  an  irregularity  as  to  hold 
that  any  person  whose  name  is  written  on  the  back  of  a  note  should 
be  chargeable  as  a  promisor.  We  should  say  that  a  name  written  on 
the  paper,  which  name  was  not  that  of  the  payee,  nor  following  his 
name  on  his  having  indorsed  it,  was  either  of  no  validity  to  bind 
such  individual,  because  the  contract  intended  to  be  entered  into, 
if  any,  was  incomplete  or  within  the  Statute  of  Frauds ;  or  that  he 
should  be  treated,  by  third  parties,  simply  as  a  second  indorser; 
leaving  the  payee  and  himself  to  settle  their  respective  liabilities, 
according  to  their  own  agreement.  But  the  validity  of  such  contracts 
has  been  so  long  established,  and  the  course  of  decisions,  on  the  whole, 
so  uniform,  that  we  have  now  only  to  apply  the  law,  as  it  has  been 
previously  settled,  in  order  to  decide  the  present  suit. 

The  first  case  of  this  description,  of  which  any  mention  is  made 
in  the  reports,  is  that  of  Sumner  v.  Parsons,  tried  before  this  court 
in  Lincoln  County,  July  Term,  1801.  The  facts  were  these :  "  Par- 
sons wrote  his  name  on  a  paper  and  gave  it  to  John  Brown,  but  there 
was  no  evidence  of  the  intent,  or  of  any  connection  in  business  be- 
tween them.  Brown  made  a  note,  on  the  other  side,  payable  to  Jesse 
Sumner  or  order,  on  demand,  with  interest,  and  signed  it,  and  thirty 
days  after  made  a  partial  payitient  on  it.  Sumner  then  got  a  writ- 
ing in  these  words  over  the  name  of  Parsons :  '  In  consideration  of 
the  subsisting  connection  between  me  and  my  son-in-law,  John 
Brown,  I  promise  and  engage  to  guaranty  the  payment  of  the  con- 
tents of  the  within  note,  on  demand.'  And  he  sued  Parsons,  de- 
claring on  the  promise,  specially  stating  it  and  the  note,  but  did  not 
aver  any  demand  on  John  Brown,  or  notice  to  Parsons.  In  two  trials 
in  the  Supreme  Judicial  Court,  it  was  held  that  Parsons  was  liable, 
and  that  Sumner  had  a  right  to  fill  the  indorsement  so  as  to  make 
Parsons  a  common  indorser  of  the  note,  with  the  rights  and  obliga- 
tions of  such,  or  a  guarantor,  warrantor,  or  surety,  liable  in  the  first 
instance,  and,  in  all  events,  as  a  joint  and  several  promisor  would 
be."  Am.  Prec.  Declarations,  113.  Mr.  Dane,  who  cites  it  in  his 
Abridgment,  Vol.  I.  416,  417,  remarks  that  "  this  case  was  carried 
as  far  as  .any  case  had  gone,  and  on  the  review  the  court  was  not 
unanimous ;  and  it  has  since  been  questioned ; "  and  we  have  no 
doubt  with  good  reason;  for  the  holder  of  the  paper,  having  him- 
self set  out  the  contract  by  the  words  written  over  the  name  of  the 
defendant,  should  have  been  held  by  its  terms,  and  the  legal  effect 
should  have  been  given  to  the  material  word  "  guaranty."  And,  in 
that  view  of  the  contract,  the  promise  of  Parsons  was  only  to  pay 
after  a  demand  upon  Brown  for  payment  and  a  refusal  by  him,  and 
of  which  Parsons  should  have  had  notice.  But  the  court  must  have 
construed  the  writing  as  constituting  him  an  original  promisor,  and 
so  bound,  absolutely,  without  notice.    And,  in  our  apprehension,  the 


UNION  BANK   OF  WEYMOUTH   AND   BRAINTREE  V.   WILLIS.         75 

writing  of  the  guaranty  over  the  name  of  Parsons  ought  not  to  have 
been  held  as  an  act  obligatory  on  him;  but  he  should  have  been 
treated,  if  held  at  all,  as  an  indorser  of  the  note,  and,  as  such,  sub- 
ject to  the  liabilities,  and  entitled  to  the  notice,  of  an  indorser.  See 
Beckwith  v.  Angell,  6  Conn.  325,  opinion  of  Hosmer,  C.  J. 

[Josselyn  v.  Ames,  3  Mass.  274,  and  Hunt  v.  Adams,  5  Mass.  358, 
s.  c.  6  Mass.  519,  considered.] 

Immediately  after,  occurred  the  case  of  Carver  v.  Warren,  5  Mass. 
545.  That  was  on  a  note  made  by  one  Cobb  to  the  plaintiff,  and  on 
the  back  of  which  the  defendant  wrote  his  name;  and  the  plaintiff 
filled  the  indorsement,  and  declared  upon  it  as  his  promise.  The 
defendant  demurred  to  the  declaration,  on  the  ground  that  this  was 
but  a  promise  to  pay  the  debt  of  another,  and  was  void  for  want  of 
consideration.  But  the  court  held  that,  by  the  pleadings,  each  prom- 
ised to  pay  the  same  sum,  and  that  the  defendant's  promise  did  not 
import  any  guaranty  or  collateral  stipulation;  and  that  if  the  de- 
fendant had  indorsed  as  guarantor,  and  the  present  indorsement  was 
filled  up  without  his  consent,  or  any  authority  from  him,  he  should 
have  pleaded  the  general  issue,  and  on  the  trial  he  might  have  availed 
himself  of  this  defence.  And  so  the  plaintiff  had  judgment  on  the 
demurrer. 

[Hemmenway  v.  Stone,  7  Mass.  58,  and  White  v.  Howland,  9  Mass. 
314.] 

The  case  of  Moies  v.  Bird,  11  Mass.  436,  which  succeeded,  is  sub- 
stantially like  the  present.  A  note  was  made  to  the  plaintiff,  and 
signed  by  Benjamin  Bird,  and  the  defendant  signed  his  name  in 
blank  on  the  back  of  the  note.  The  court  say,  the  defendant  "  leaves 
it  to  the  holder  of  the  note  to  write  anything  over  his  name  which 
might  be  considered  not  to  be  inconsistent  with  the  nature  of  the 
transaction.  The  holder  chooses  to  consider  him  as  a  surety,  bind- 
ing himself  originally  with  the  principal;  and  we  think  he  has  a 
right  so  to  do.  If  he  was  a  surety,  then  he  may  be  sued  as  an  origi- 
nal promisor." 

In  the  case  of  Baker  v.  Briggs,  8  Pick.  130,  which  was  an  action 
to  recover  the  amount  of  a  promissory  note  made  by  one  Eyan  to  the 
plaintiff,  the  name  of  the  defendant,  Briggs,  was  written  on  the  back 
of  it,  and  the  courts  say  that,  according  to  several  decisions  it  was 
right  to  declare  against  him  as  promisor,  though  he  stood  in  the  re- 
lation of  surety  to  Eyan,  who  signed  the  note  on  the  face  of  it. 

The  case  of  Chaffee  v.  Jones,  19  Pick.  260,  was  assumpsit  on  a 
note  signed  by  Israel  A.  Jones,  as  principal,  and  Eber  Jones  and 
E.  Owen  &  Sons,  as  sureties,  by  which  they  jointly  and  severally 
promised  to  pay  the  president,  etc.,  of  the  Housatonic  Bank,  or  their 
order;  and  the  plaintiff  put  his  name  on  the  back  of  the  note,  in 
blank.    The  plaintiff  was  called  upon,  after  the  neglect  of  the  makers, 


76  MAKEU'S  CONTRACT. 

and  he  paid  it  to  the  bank.  The  court  held  that  where  one,  not  a 
promisor  nor  indorser,  puts  his  name  on  a  note,  meaning  to  make 
himself  liable  with  the  promisor,  he  is  to  be  regarded  as  a  joint 
promisor  and  surety.  He  is  not  liable  as  indorser,  for  the  note  is 
not  negotiated,  nor  a  title  made  to  it,  through  his  indorsement;  nor 
as  guarantor,  there  being  no  distinct  consideration;  but  he  means 
to  give  security  and  validity  to  the  note  by  his  credit  and  promise, 
and  it  is  immaterial,  for  this  purpose,  on  what  part  of  the  note  he 
places  his  name.  So  in  Austin  v.  Boyd,  24  Pick.  64,  where  the  de- 
fendant's name  was,  in  like  manner,  on  the  note,  it  was  held  that 
the  party,  by  thus  putting  his  name  on  the  back,  makes  himself  an 
original  promisor.    He  intends  by  it  to  give  credit  to  the  note. 

The  case  of  Samson  v.  Thornton,  3  Met.  275,  was  assumpsit  on  a 
note  made  by  Benjamin  Eussell  to  the  plaintiff,  and  was  indorsed 
by  the  defendant  Thornton;  and  the  declaration  charged  him  as  an 
original  promisor.  The  court  there  ruled  that  the  defendant,  not 
being  the  payee  of  the  note,  must  be  held  to  stand  in  the  character  of 
an  original  joint  promisor  and  surety. 

The  case  of  Richardson  v.  Lincoln,  5  Met.  201,  is  of  the  same  type. 
.  .  .  See  also  Sumner  v.  Gay,  4  Pick.  311. 

The  same  questions  have  arisen  in  New  York  in  various  cases,  and 
have  been  decided  in  a  similar  manner.^  They  will  be  found  cited 
in  Story  on  Notes,  §§  59,  472-480,  where  the  subject  is  fully  dis- 
cussed, and  the  authorities  examined. 

To  hold  the  party,  however,  as  promisor,  where  the  name  alone  is 
written,  it  must  appear  that  he  made  the  promise  at  the  time  when 
the  note  itself  was  made ;  otherwise,  he  may  either  not  be  chargeable 
at  all,  or  be  chargeable  as  surety  or  guarantor,  according  to  the  facts 
proved.  Carver  v.  Warren,  5  Mass.  545;  Tenney  v.  Prince,  4  Pick. 
385;  Baker  v.  Briggs,  8  Pick.  122,  130;  Oxford  Bank  v.  Haynes, 
8  Pick.  423;  Story  on  Notes,  §§  473,  474;  Beckwith  v.  Angell, 
6  Conn.  315.  But  that  the  promise  was  made  at  the  same  time  with 
the  note  is  a  fact  which  is  to  be  presumed  when  the  note  is  in  the 
hands  of  a  bona  fide  holder,  and  nothing  is  shovm  to  the  contrary. 
And,  in  the  present  case,  the  note  was  offered  to  the  plaintiffs  for  dis- 
count by  the  maker  himself,  with  the  names  of  Mirick  &  Co.  and 
Willis  on  the  back  of  it;  showing  it,  therefore,  to  have  been  an 
original  undertaking  on  their  part. 

It  was  contended,  in  the  argument,  that  Mirick  &  Co.  were  merely 
sureties,  and  that  the  plaintiffs  had  a  right  to  treat  them  as  such, 
and  therefore  were  not  bound  to  demand  payment  of  them  as  makers, 
as  a  necessary  step  to  enable  them  to  charge  the  indorser;  the  rela- 
tion of  promisor,  surety,  and  guarantor  being  distinct.  There  is, 
unqiiestionably,  a  distinction  between  these  several  undertakings; 
and  always  so  in  regard  to  a  mere  guarantor.  But  as  to  the  subsist- 
1  A  mistake.    See  Bigelow,  Bills  and  Notes,  47  ;  post,  p.  78. 


UNION   BANK  OF   WEYMOUTH   AND   BRAINTREE   V.   WILLIS.        77 

ing  relations  between  a  principal  and  surety,  they  rarely  affect  the 
contract  between  the  creditor  and  surety.  A  man  may  be  equally  a 
surety  and  an  original  promisor ;  as  where  the  promise  is,  I,  A  B,  as 
principal,  and  I,  C  D,  as  surety,  promise  to  pay ;  or  where  the  party 
signs,  and  adds  to  his  name  the  word  "  surety."  This  does  not  make 
him  less  a  promisor.  It  only  defines  the  relation  between  him  and  his 
co-promisor ;  and,  as  promisor,  the  necessity  of  a  presentment  to  him 
is  not  dispensed  with,  if  the  intention  of  the  holder  of  the  note  is  to 
charge  the  indorser.  It  is  not  for  the  holder  to  choose  in  what  char- 
acter he  will  consider  the  party  who  has  put  his  name  on  the  note; 
but  he  must  treat  him  as  sustaining  that  legal  relation  which  the 
facts  establish.  If  he  put  his  name  on  the  note  at  the  time  it  was 
made,  like  the  case  at  bar,  he  is  a  promisor;  if  after  the  making 
of  the  paper,  he  is  a  surety  or  a  guarantor,  according  to  the  agree- 
ment upon  which  he  gives  his  signature.  The  fixing  of  the  relation 
of  the  party,  when  he  enters  into  the  contract,  is  necessary  for  the 
protection  of  holders,  and  for  guarding  the  rights  of  indorsers  whose 
liability  is  conditional.  If  it  were  held  otherwise,  I  do  not  well  see 
how  such  contracts  could  be  supported  against  the  objection  of  being 
void  as  within  the  Statute  of  Frauds.^ 


1  The  Statute  of  Frauds  everywhere  requires  that  the  contract  shall  be  in  writing ; 
and  in  some  States,  as  in  England,  it  further  requires  a  recital  of  consideration.  The 
irregular  indorsement  is,  if  anything,  a  contract  of  the  common  law,  and,  in  the  case 
of  a  bill  of  exchange,  is  not  enforceable  because  the  contract  is  not  in  writing.  In 
Jenkins  v,  Coomber,  1898,  2  Q.  B.  168,  an  action  was  brought  against  Alfred  Coom- 
ber  on  a  bill  of  exchange  in  the  following  form : 

"London,  Aug.  5,  1897. 
£57  :  0:0 

Three  months  after  date  pay  to  our  order  the  sum  of  Fifty-seven  pounds  for  value 
received.  J,  Jenkins  &  Sons. 

To  Mr.  Arthur  Coombek. 

Accepted  payable  at  the  London  and  County  Bank.    Arthur  Coomber." 

Indorsed  "Alfred  Coomber,"  "J.  Jenkins  &  Sons." 

It  was  contended  by  the  plaintiff  that  Alfred  Coomber  was  liable  as  an  indorser ; 
the  defendant's  contention  was  that,  if  liable  at  all,  his  liability  was  primary,  i.  e.  as 
surety. 

Mr.  Justice  Wills,  in  dismissing  the  action,  said : 

"  The  general  principle  since  the  Act*  of  1882  seems  to  me  to  be  exactly  as  it  was 
laid  down  in  Steele  v.  McKinlay  (5  App.  Cases,  754),  and  the  contract  of  indemnity  on 
which  the  plaintiff  relies  is  one  which  is  not  recognized  by  the  law  merchant,  but 
which  arises  solely  from  an  agreement  between  the  parties.  It  is,  however,  here 
relied  upon  as  giving  a  primary  liability  again.st  the  defendant  upon  this  bill  of  ex- 
change. That,  as  Lord  Watson  points  out  in  Steele  v.  McKinlay,  will  not  do.  If  the 
agreement  exists  at  all,  it  must  exist  as  a  contract  of  suretyship,  and  for  that  purpose 
it  must  satisfy  the  requirements  of  the  Statute  of  Frauds." 

In  the  case  of  a  promissory  note,  the  contract  will  not  be  enforceable  where  the 
statute  requires  a  recital  of  consideration,  and  no  consideration  is  recited  in  the  note. 

*  The  Bill  of  Exchange  Act,  §  56.  The  American  statute  contains  the  added  provisions  of 
the  N.  I.  L.  §  81. 


78  maker's  contract. 

SEABUEY  V.  HUNGEEFORD. 

Supreme  Court  of  New  York,  October,  1841.     2  Hill,  80. 

In  others,  he  is  deemed  an  indorser.^ 

Assumpsit.  The  plaintiff  gave  in  evidence  a  promissory  note  as 
follows:  "  Knox,  March  30,  1837.  Six  months  after  date,  for  value 
received,  we  jointly  and  severally  promise  to  pay  Daniel  Seabury,  or 
bearer,  the  sum  of  one  hundred  and  twenty-five  dollars,  with  interest 
from  date.  Justus  Pickering."  On  the  back  was  the  defendant's 
name,  "  John  I.  Hungerford,  backer,  Schoharie."  On  this  evidence 
the  plaintiff  claimed  to  recover.  The  judge  decided  that  the  defend- 
ant was  to  be  regarded  as  an  indorser  of  the  note,  and  that  the 
plaintiff  must  show  a  demand,  and  notice  of  non-payment;  that  the 
defendant  could  not  be  charged  as  maker  or  guarantor  without  show- 
ing that  he  was  privy  to  the  consideration  of  the  note.  The  plaintiff 
excepted.  A  witness  for  the  plaintiff  testified  that  he  heard  the 
defendant  say  that  if  it  had  not  been  for  getting  his  own  pay  from 
Pickering,  the  maker,  he,  Hungerford,  would  not  have  signed  the 
note.  This  conversation  was  near  where  the  defendant  lived  in  Scho- 
harie, in  October,  1837.  The  witness  went  with  the  plaintiff  to  de- 
mand and  get  the  money  on  the  note.  The  defendant  first  said  to  the 
plaintiff,  "You  are  too  late;  you  should  have  come  on  the  15th  of 
September ; "  but  after  looking  at  the  note  he  said,  "  You  are  right." 
The  plaintiff  said  he  had  seen  Pickering  the  day  before,  and  could, 
not  get  the  money  from  him  except  $18,  which  he  then  paid.  There 
was  no  proof  of  a  demand  and  notice  at  the  proper  time  to  charge  the 
defendant  as  indorser.  The  judge  decided  that  this  evidence  was  not 
sufficient  to  charge  the  defendant  on  the  ground  of  his  being  privy  to 
the  consideration  of  the  note;  and  that  the  fact  that  the  defendant 
put  his  name  on  the  note  to  enable  Pickering  to  procure  the  money 
from  the  plaintiff  did  not  alter  the  case  —  the  defendant  was  an 
indorser,  and  entitled  to  require  demand  and  notice.  The  plaintiff 
excepted,  and  the  jury  found  a  verdict  for  the  defendant.  The  plain- 
tiff now  moved  for  a  new  trial,  on  a  bill  of  exceptions. 

[Argument  reported.] 

Bronson,  J.  Although  the  nature  of  the  obligation  which  the 
defendant  intended  to  contract  was  sufficiently  manifested  by  putting 
his  name  on  the  back  of  the  note,  he  seems  to  have  added  the  word 
"  backer  "  for  the  purpose  of  declaring  still  more  explicitly  that  he 
was  to  be  regarded  as  an  indorser ;  and  his  residence  was  given  for  the 
purpose  of  indicating  the  place  to  which  notice  might  be  sent  in  case 

1  This  is  the  rule  of  the  Statute.    N.  I.  L.  §  81. 


SEABURY  V.   HUNGERFOED.  79 

the  note  should  not  be  paid  at  maturity  by  the  maker.  I  infer  also 
from  the  conversation  between  the  parties  about  the  time  the  note  fell 
due,  that  they  both  regarded  the  defendant  as  standing  in  the  charac- 
ter of  an  indorser  and  entitled  to  notice  as  such.  I  do  not  see,  there- 
fore, upon  what  principle  he  can  be  charged  as  maker  or  guarantor. 
It  would  be  substituting  a  new  contract  for  the  one  which  the  parties 
have  made. 

If  the  special  circumstances  which  have  been  mentioned  are  laid 
out  of  view,  the  result  will  still  be  the  same.  When  a  man  writes  his 
name,  without  anything  more,  on  the  back  of  a  negotiable  promissory  ' 
note,  he  agrees  that  he  will  pay  the  note  to  the  holder  on  receiving 
due  notice  that  the  maker,  on  demand  made  at  the  proper  time,  has 
neglected  to  pay  it.  This  is  the  legal  effect  of  the  indorsement,  and  / 
the  case  is  not  open  to  any  intendment,  —  certainly  not  to  the  pre- 
sumption that  the  party  meant  to  contract  a  different  obligation. 
Proof  that  he  put  his  name  on  the  note  for  the  purpose  of  giving 
credit  to  the  maker,  or  enabling  him  to  raise  money  upon  the  paper, 
only  shows  that  there  is  a  special  relation  between  him  and  the  maker, 
not  between  him  and  the  holder.  It  does  not  change  the  nature  of 
the  contract  of  indorsement  from  what  it  would  be  had  the  note 
actually  passed  through  his  hands  in  the  usual  course  of  business  and 
been  indorsed  for  value.  If  this  be  not  so,  then  every  accommodation 
indorser  may  be  treated  as  a  maker  or  guarantor  of  the  paper. 

Now,  what  did  the  plaintiff  prove  for  the  purpose  of  obviating  the 
objection  that  there  had  been  no  demand  and  notice  ?  The  defendant 
said,  about  the  time  the  note  fell  due,  that  if  it  had  not  been  for 
getting  his  own  pay  from  Pickering,  the  maker,  he  would  not  have 
signed  the  note.  This  does  not  prove  that  there  was  originally  any 
agreement  or  understanding  between  the  plaintiff  and  the  defendant 
aside  from  the  contract  of  indorsement,  or  that  they  had  any  com- 
munication whatever  in  relation  to  the  giving  or  indorsing  of  the 
note.  The  most  that  can  be  justly  inferred  from  the  admission  is, 
that  the  defendant  indorsed  for  the  accommodation  of  Pickering, 
and  that  his  motive  for  doing  so  was  the  expectation  of  getting  a  debt 
which  Pickering  owed  him.  But  neither  the  fact  of  his  being  an 
accommodation  indorser,  nor  his  motive  for  becoming  such,  can  affect 
the  present  question.  The  plaintiff  had  nothing  to  do  with  the  mode 
in  which  Pickering  should  dispose  of  the  money  to  be  obtained  on 
the  note ;  and  whether  the  defendant  did  an  act  of  mere  benevolence, 
or  whether  he  expected  to  derive  some  personal  advantage  from  the 
indorsement,  cannot  alter  the  nature  of  his  contract. 

If  we  assume  that  the  note  was  originally  passed  to  the  plaintiff, 
who  is  named  in  it  as  payee,  that  will  not  alter  the  case.  The  defend- 
ant might  still  have  been  charged  as  indorser ;  and  where  he  may  be 
so  charged,  he  cannot,  I  think,  be  made  liable  in  any  other  form. 
The  note  is  payable  to  the  plaintiff  or  bearer,  and  in  its  legal  effect 


80  maker's  contract. 

was  payable  to  the  bearer.^  The  plaintiff  might  have  declared  that 
Pickering  made  his  promissory  note  payable  to  bearer,  and  delivered 
it  to  the  defendant,  who  thereupon  indorsed  and  delivered  it  to  the 
plaintiff,  with  an  averment  that  payment  was  demanded  of  the  maker 
at  maturity,  and  due  notice  of  non-payment  given  to  the  defendant. 
The  plaintiff  might  also  have  transferred  the  note  by  delivery  to  some' 
third  person,  and  then  the  holder  might  have  declared  in  the  same 
way;  or  he  could  have  alleged  that  Pickering  made  his  note  pay- 
able to  Daniel  Seabury  or  bearer,  that  Seabury  delivered  it  to  the 
defendant,  who  indorsed  and  delivered  it  to  the  holder.  But  without 
transferring  the  note,  if  the  plaintiff  had  taken  the  proper  steps  for 
that  purpose  there  could  be  no  difficulty  in  his  declaring  and  recover- 
ing against  the  defendant  as  indorser.  "We  had  occasion  to  consider 
this  question  in  Dean  v.  Hall,  17  Wendell,  214,  and  that  case  will  be 
found  to  be  entirely  decisive  of  the  one  at  bar.  Coleman  made  his 
promissory  note  payable  to  Howard  or  bearer,  upon  the  back  of  which 
Hall  indorsed  his  name,  and  the  note  was  then  delivered  to  Howard, 
the  payee  named  in  it.  We  held  that  there  was  no  legal  difference 
between  a  note  payable  to  bearer  and  one  payable  to  a  particular 
person  or  bearer ;  that  Howard,  the  payee,  or  Dean,  to  whom  he  had 
transferred  the  note,  might  either  of  them  have  declared  and  recov- 
ered against  Hall  as  indorser ;  and  that  they  could  not  charge  him  in 
any  other  character. 

If  the  note  had  not  been  negotiable,  or  if  for  any  other  reason  the 
case  had  been  such  that  the  defendant  could  not,  by  the  exercise  of 
proper  diligence,  have  been  charged  as  indorser,  and  there  had  been 
an  agreement  that  he  would  answer  in  some  other  form,  then  the 
plaintiff  might  have  written  over  the  name  such  a  contract  as  would 
carry  into  effect  the  intention  of  the  parties.  When  a  contract  cannot 
be  enforced  in  the  particular  mode  contemplated  by  the  parties,  the 
courts,  rather  than  suffer  the  agreement  to  fail  altogether,  will,  if 
possible,  give  effect  to  it  in  some  other  way.  But  they  never  make 
contracts  for  parties,  nor  substitute  one  contract  for  another.  This 
was,  in  legal  effect,  regular  mercantile  paper,  upon  which  the  defend- 
ant contracted  the  obligation  of  an  indorser  within  the  law  mer- 
chant ; '  and  by  that  obligation,  and  no  other,  he  is  bound. 

It  is  said  that  the  defendant  was  privy  to  the  consideration  for 
which  the  note  was  given,  and  therefore  liable  as  maker  or  guarantor. 
But  it  is  not  enough  that  the  indorser  knows  what  use  is  to  be  made 
of  the  note,  or  that  he  indorses  for  the  purpose  of  giving  the  maker 
credit,  either  generally  or  with  a  particular  individual.    If  the  note 

1  Cf.  Bigelow  V.  Colton,  13  Gray,  309,  post,  p.  82 ;  M'Fetrich  v.  "Woodrow,  67 
N.  H.  174  ;  Bigelow,  Bills  and  Notes,  48. 

'  Cf.  Bigelow  V.  Colton,  13  Gray,  309,  post,  p.  82. 

The  indorsement  in  this  case  was  not  irregular  at  all,  and  this  statement  is  accnrate. 
See  opinion  of  Mr.  Justice  Wills  in  Jenkins  v.  Coomber,  1898,  2  Q.  B.  168. 


SEABURY  V.    IlUNGEIiFORD.  81 

is  negotiable,  the  only  inference  to  be  drawn  from  the  fact  of  his 
putting  his  name  on  the  back  of  it  is,  that  he  intended  to  give  tlie 
maker  credit  by  becoming  answerable  as  indorser;  and  this  inference 
is  so  strong  that  it  will  prevail  even  where  his  obligation  as  indorser 
cannot  be  made  operative  without  first  obtaining  the  name  of  another 
person  to  the  paper.  Herrick  v.  Carman,  12  Johns.  159 ;  Tillman 
V.  Wheeler,  17  Johns.  326.  Before  he  can  be  made  liable  as  maker  or 
guarantor,  there  must  at  the  least  be  an  agreement  that  he  will  an- 
swer as  such.  Nelson  v.  Dubois,  13  Johns.  175.  And  where  a  parol 
agreement  to  that  effect  is  shown,  I  do  not  see  how  it  can  be  made  to 
take  the  place  of  the  written  contract  of  indorsement.  In  other  cases 
the  rule  is,  that  when  parties  have  come  to  a  written  contract,  that  is 
taken  as  the  evidence  of  their  final  agreement,  and  all  prior  negotia- 
tions are  merged  in  it.  In  Nelson  v.  Dubois  the  defendant  agreed  to 
become  security  for  Brundige,  and  to  guaranty  the  payment  of  a  note 
which  B.  was  about  to  make  to  the  plaintiff;  but  when  the  contract 
came  to  be  reduced  to  writing,  it  took  the  form  of  a  negotiable  prom- 
issory note  upon  which  the  defendant  might  have  been  charged  as 
indorser.  That  was  the  final  agreement  between  the  parties,  and  I 
see  no  principle  upon  which  the  plaintiff  could  be  allowed  to  abandon 
the  written  contract  and  go  back  to  the  prior  negotiations  for  the 
purpose  of  charging  the  defendant  as  guarantor.  And  although  the 
defendant  was  charged  in  that  form,  the  case  is  not,  I  think,  an 
authority  for  the  position  which  it  is  usually  cited  to  support.  The 
point  that  the  defendant  might  have  been  made  answerable  as  in- 
dorser was  neither  taken  at  the  trial  nor  on  the  argument,  nor  was  it 
mentioned  by  the  court ;  but  the  contrary  was  assumed  in  every  stage 
of  the  cause.  The  only  objection  made  at  the  trial  or  on  the  argu- 
ment was,  that  the  case  fell  within  the  influence  of  the  Statute  of 
Frauds.  It  was  assumed  that  the  defendant  could  only  be  charged 
as  guarantor,  and  the  objection  was  that  the  contract  of  guaranty 
should  have  been  written  out  at  the  time  the  defendant  put  his  name 
on  the  note.  Spencer,  J.,  who  delivered  the  opinion  of  the  court, 
stated  at  the  outset  that  the  ease  turned  on  the  point  whether  the 
promise  was  within  the  Statute  of  Frauds.  He  then  proceeded,  to 
cite  cases  where  the  party  had  been  held  answerable  as  guarantor, 
although  the  contract  had  not  been  written  out  in  full  at  the  time; 
but  they  are  all  cases  where  he  could  not  have  been  charged  as  in- 
dorser. Nelson  v.  Dubois  is  then  an  authority  for  the  position  that 
one  who  puts  his  name  in  blank  on  the  back  of  a  promissory  note 
may  be  held  liable  as  maker  or  guarantor  when  there  is  an  agreement 
to  that  effect,  and  when  he  could  not  be  charged  as  indorser :  the  case 
is  not  within  the  Statute  of  Frauds.  But  it  is  not  an  authority  for 
saying  that  the  usual  contract  of  indorsement  upon  commercial  paper 
can  be  changed  into  something  else  by  showing  a  prior  parol  agree- 
ment to  be  answerable  in  some  other  form.    This  court  could  never 

6 


82  maker's  contract. 

have  intended  to  sanction  the  doctrine  that  the  holder  of  a  negotiable 
promissory  note  may  abandon  the  contract  in  writing  actually  made 
by  the  indorser  and  substitute  another  contract  in  its  place. 

In  any  view  of  the  case  of  Nelson  v.  Dubois  it  proves  nothing 
against  this  defendant,  for  here  there  was  not  only  a  regular  contract 
of  indorsement,  but  there  is  not  a  particle  of  evidence,  by  parol  or 
otlierwiso,  that  the  defendant  ever  made  any  dilferent  agreement.  It 
is  impossible  to  charge  him  as  maker  or  guarantor.  The  cases  on  this 
subject  were  so  fully  considered  in  Dean  v.  Hall,  17  Wendell,  214, 
that  I  do  not  think  it  necessary  to  examine  them  on  the  present 
occasion. 

New  trial  denied. 

Nelson,  C.  J.,  dissented. 


BIGELOW  V.  COLTON. 

Supreme  Court  of  Massachusetts,  September,  1859.     13  Gray,  309. 

Indorsement  in  blank  by  a  third  person,  on  au  instrument  payable  to  bearer,  is  not 
irregular. 

AcTiox  of  contract  against  Aaron  Colton  as  a  joint  and  several 
maker  of  this  promissory  note: 

"  Great  Barrington,  July  18th,  1857.  Two  months  after  date  I 
promise  to  pay  to  the  order  of  myself  two  hundred  and  fifty  dollars 
at  the  Mahaiwe  Bank,  for  value  received. 

Edwin  Hurlbut." 

Upon  the  back  of  the  note  was  the  signature  of  Hurlbut,  and  under 
it  that  of  Colton;  and  at  the  trial  in  the  Court  of  Common  Pleas  it 
appeared  that  both  names  were  signed  before  the  delivery  of  the  note 
to  the  plaintiff;  the  signature  of  Hurlbut  being  made  first.  Bishop, 
J.,  ruled  that  the  defendant  could  not  be  held  as  a  maker,  and  directed 
a  verdict  for  the  defendant,  which  was  returned,  and  the  plaintiff 
alleged  exceptions. 

[Argument  not  reported.] 

BiGELOw,  J.  A  promissory  note  payable  to  the  order  of  the  maker, 
and  by  him  indorsed,  is  in  legal  effect  a  note  payable  to  bearer.  By 
placing  his  name  on  the  back  of  the  note,  the  maker  agrees  to  pay 
it  to  whomsoever  may  be  the  holder  thereof.  Story  on  Notes,  §§  16, 
36  a.  Although  a  note  payable  to  bearer  is  transferable  by  delivery, 
it  may  also  be  transferred  by  the  indorsement  of  any  holder.  In  such 
case,  the  indorser  incurs  the  same  obligations  and  liabilities  as  an 


ESTES   V.   TOWER.  83 

indorser  of  a  note  payable  ±o  order,  and  is  entitled  to  demand  and 
notice.    Story  on  Notes,  §  133. 

This  case  does  not  fall  within  that  anomalous  class  of  cases  where 
a  third  person,  neither  maker  nor  payee,  puts  his  name  on  the  back 
of  a  note  before  its  indorsement  by  the  payee;  but  is  the  ordinary 
case  of  an  indorsement  of  a  note  payable  to  bearer,  the  effect  of  which 
cannot  be  varied  or  controlled  by  parol  proof.  Pierce  v.  Mann,  17 
Pick.  244 ;  Howe  v.  Merrill,  5  Cush.  80 ;  Pre^cott  Bank  v.  Caverly, 
7  Gray,  320. 

Exceptions  overruled. 


ESTES  V.  TOWEE. 

Supreme  Court  of  Massachusetts,  September,  1869.     102  Mass.  65. 

The  maker's  contract  is  to  pay  according  to  the  tenor  of  the  instrument ;  ^  suit  is 
sufficient  demand. 

Contract  on  a  promissory  note  dated  February  9,  1853,  at  North 
Adams,  and  payable,  thirteen  years  after  date,  to  the  bearer,  without 
any  specification  of  a  place  of  payment.  Writ  dated  February  13, 
1866.  The  officer  made  return  of  an  attachment  of  real  estate  thereon 
at  fifteen  minutes  past  six  o'clock  in  the  afternoon  of  that  day.  At 
the  trial  in  the  Superior  Court,  before  Wilkinson,  J.,  evidence  was 
introduced  tending  to  prove  that  the  defendant  signed  the  note,  which 
was  also  signed  by  Francis  N.  Eice;  and  it  was  in  controversy 
whether  or  not  the  defendant  was  liable  thereon  as  an  original  prom- 
isor, and  testimony  was  offered  and  rulings  were  made  on  that 
question,  which  are  immaterial  to  this  report. 

An  attorney  at  law,  called  as  a  witness  by  the  plaintiff,  testified 
that  he  made  the  writ  on  the  day  of  its  date,  after  candle-light,  and, 
as  he  thought,  between  five  and  six  o'clock  in  the  afternoon;  that 
the  officer  sat  waiting  while  he  drew  it;  and  that  as  soon  as  it  was 
drawn  he  handed  it  to  the  officer,  who  immediately  wrote  on  it  his 
return  of  the  attachment. 

No  demand  and  refusal  of  payment  was  proved;  the  defendant 
contended  that  the  action  was  prematurely  brought;  the  judge  so 
ruled,  and  directed  a  verdict  for  the  defendant,  which  was  returned; 
and  the  plaintiff  alleged  exceptions. 

[Argument  not  reported.] 

Gray,  J.  A  promissory  note  entitled  to  grace  is  payable  on  de- 
mand at  any  reasonable  time  and  place  on  the  last  day  of  grace,  and, 
if  the  maker  neglects  or  refuses  payment  upon  such  demand,  the  note 

1  N.  I.  L.  §  77. 


84  maker's  contkact. 

is  dishonored  and  may  be  put  in  suit  immediately ;  *  but  if  no  such 
demand  is  made,  and  he  has  done  nothing  amounting  to  a  waiver  of 
it,  he  has  the  whole  of  the  day  in  wliich  to  make  payment,  and  is  not 
liable  to  an  action  until  the  expiration  of  the  time  within  which  such 
demand  might  have  been  made  upon  him.  Gordon  v.  Parmelee, 
15  Gray,  413.  In  the  ease  of  a  note  not  in  terms  payable  at  a  bank  ^ 
or  other  place  of  business,  the  demand  may  be  made  at  the  maker's 
dwelling-house  at  any  hour  at  which,  having  regard  to  the  habits 
and  usages  of  the  community  in  which  he  lives,  he  may  reasonably 
be  expected  to  be  in  a  condition  to  attend  to  ordinary  business,  even 
as  late  as  eight  or  nine  o'clock  in  the  evening.  Triggs  v.  Newnham, 
10  Moore,  249 ;  Farnsworth  v.  Allen,  4  Gray,  453.  It  was  therefore 
rightly  ruled  at  the  trial  that  this  action  was  prematurely  commenced. 

The  case  of  Butler  v.  Kimball,  5  Met.  94,  upon  which  the  plaintiff 
relies,  and  in  which  the  maker  of  a  note  was  held  liable,  without  a 
previous  demand,  upon  a  writ  made  after  sunset  on  the  last  day  of 
grace  and  delivered  to  an  officer  on  the  next  daj^,  does  not  rest  upon 
the  ground  that  suit  might  be  brought  immediately  after  sunset  on 
the  last  day  of  grace ;  but  upon  the  ground  that  it  was  reasonably  to 
be  inferred  that  the  writ  was  filled  up  provisionally  and  not  intended 
to  be  used  until  the  next  day,  when  it  was  delivered  to  the  officer, 
and  that  the  making  of  the  writ  was  no  more  to  be  deemed  the  com- 
mencement of  the  action  than  if  the  plaintiff,  instead  of  keeping  it 
in  his  own  hands,  had  delivered  it  to  the  officer  that  night  with 
instructions  not  to  serve  it  until  the  next  day,  or  had  sent  it  to  the 
officer,  but  it  had  not  yet  reached  him.  Swift  v.  Crocker,  21  Pick. 
241;  Seaver  v.  Lincoln,  21  Pick.  267;  Emerson  v.  White,  10  Gray, 
351. 

In  the  case  at  bar,  the  writ  was  not  only  made,  but  served,  before 
any  cause  of  action  had  accrued  against  the  defendant. 

Exceptions  overruled. 

1  See  Kennedy  v.  Thomas,  1894,  2  Q.  B.  759  [C.  A.],  contra  ;  Bigelow,  Bills  and 
Notes,  42. 

2  As  to  notes  payable  at  a  bank,  see  Exchange  Bank  v.  Bank  of  North  America, 
132  Mass.  147. 


SWOPE  V.   EOSS.  85 


CHAPTER  V. 

acceptor's  contract. 


SWOPE  V.  EOSS. 

Supreme  Court  of  Pennsylvania,  July,  1861.    40  Penn.  State,  186. 

Until  the  drawee  of  a  bill  of  exchange  has  accepted  it,  he  is  a  stranger  thereto.* 

Assumpsit  upon  the  following  case  stated: 

Eoss  Forward  gave  to  Swope  &  Karns  the  following  instrument 
of  writing: 

"  Somerset,  Pa.,  August  18,  1859. 
"  George  Eoss  &  Co.,  bankers,  pay  to  Swope  &  Karns  or  order, 
ninety  days  from  date,  six  hundred  and  sixteen  dollars. 

Eoss  Forward." 

On  or  about  the  1st  of  September  thereafter,  Swope,  one  of  the 
firm  of  Swope  &  Karns,  delivered  this  paper  (indorsed  Swope  & 
Karns)  to  the  plaintiffs'  bank,  had  the  same  discounted,  and  received 
the  money  thereon,  less  the  discount,  $16.40.  At  the  time  this  cheque 
was  given,  and  when  it  was  discounted  at  the  bank,  Eoss  Forward  was 
one  of  the  firm  of  George  Eoss  &  Co.,  but  went  out  on  the  19  th  of 
Septemher,  1859.  When  the  day  of  payment  named  in  the  cheque 
came  round,  Forward  had  no  funds  in  the  bank,  and  the  paper  was 
regularly  protested  for  non-payment  on  the  19th  of  November,  1859.. 

If  the  court  be  of  the  opinion  that,  on  the  above  state  of  facts,  the 
plaintiffs  are  entitled  to  recover,  the  judgment  to  be  entered  in  favor 
of  plaintiffs  for  $616,  with  interest  from  Nov.  9,  1859;  otherwise 
judgment  for  defendant  with  costs.  Judgment  for  plaintiffs.  Writ 
of  error. 

[Argument  reported.] 

Strong,  J.  The  question  presented  by  the  case  stated  is  quite 
novel,  and  we  have  not  been  able  to  find  that  it  has  been  adjudicated. 
Undoubtedly  the  acceptor  of  a  bill  of  exchange  is  the  principal  debtor, 
and  the  drawer  and  indorsers  are  but  sureties.  Of  course  the  ac- 
ceptor, even  after  payment,  cannot  sue  either  the  drawer  or  indorser 

1  N.  I.  L.  §  144. 


86  ACCEPTOIi's   CONTRACT. 

of  the  bill  unless  his  acceptance  was  supra  protest.  His  payment  of 
the  bill  extinguishes  it,  but  the  case  stated  finds  that  the  plaintiffs 
discounted  the  bill  for  the  payees  before  it  became  payable,  not  that 
they  accepted  it  or  paid  it.  Discounting  a  bill,  though  it  be  done  by 
the  drawee,  is  neither  acceptance  nor  payment.  Acceptance  is  an 
engagement  to  pay  the  bill  according  to  its  tenor  and  effect  when  it 
becomes  due,  not  before.  A  bill  is  paid  only  when  there  is  an  inten- 
tion to  discharge  and  satisfy  it.  In  Burbridge  v.  Manners,  3  Camp. 
194,  Lord  Ellenborough  said  "  that  even  payment  of  a  bill  before  it 
became  due  does  not  extinguish  it  any  more  than  if  it  were  merely  dis- 
counted," and  added  that  "  payment  means  payment  in  due  course 
and  not  by  anticipation."  His  lordship  evidently  thought  that  dis- 
counting a  bill  by  a  drawee  is  neither  payment  nor  extinguishment. 
In  Attenborough  v.  McKenzie,  in  the  English  Court  of  Exchequer, 
36  Eng.  L.  &  Eq.  562,  it  was  held  that,  if  the  acceptor  of  a  bill  dis- 
counts it,  he  may  reissue  it  so  as  to  charge  the  drawer ;  that  nothing 
will  discharge  the  drawer  but  payment ;  i.  e.,  pa^^ment  when  due,  or 
payment  for  the  purpose  of  discharging  and  satisfying  the  bill. 
Tlierefore,  if  the  acceptor  discounts  the  bill  for  the  drawer  and  then 
indorses  it  away,  iOae  drawer  will  be  liable  upon  it  to  the  holder,  and 
the  transfer  by  the  drawer  to  the  acceptor  will  operate  as  an  indorse- 
ment, although. at  the  time  the  drawer  does  not  intend  to  transfer  by 
way  of  indorsement,  being  under  the  impression  that  the  bill  is 
discharged  by  coming  into  the  hands  of  the  acceptor.  Nor  will  the 
payment  of  the  amount  less  the  discount  be  deemed  a  payment  of  the 
JdIII  by  the  acceptor.  In  that  case  the  holder  of  the  bill  took  it  by 
indorsement  after  it  was  due,  from  the  transferee  of  the  acceptor. 
The  ruling  goes  to  the  length  that  even  the  accepting  drawee  of  a  bill 
may  take  it  as  an  indorsee,  and  as  such  may  issue  it.  It  also  decides 
that  he  does  take  it  as  an  indorsee  when  he  discounts  it.  Can  then 
the  drawee  of  a  bill,  payable  on  time,  who  has  discounted  it,  maintain 
an  action  on  it  against  the  drawer  or  indorser  if  it  be  protested  for 
non-payment  and  notice  be  given  ?  He  is  not  a  party  to  the  bill  until 
he  has  accepted  it.  Until  then,  he  has  not  assumed  the  position  of 
principal  debtor,  nor  undertaken  any  obligation  in  regard  to  it.  His 
discounting  has  neither  paid  nor  extinguished  it,  and  it  is  not  a 
promise  to  pay  according  to  its  tenor  and  effect.  Is  he  precluded 
from  becoming  an  indorsee  by  the  fact  that  the  bill  was  directed  to 
him?  It  seems  well  settled  that  the  drawee  of  a  bill  may  accept  or 
pay  it,  supra  protest,  for  honor  of  the  drawer  or  indorser,  and  if  he 
takes  it  up  he  stands  in  the  position  of  an  indorsee  paying  full  value 
for  it,  has  the  same  remedies  to  which  an  indorsee  would  be  entitled 
against  all  prior  parties,  and  can  of  course  sue  the  drawer  or  indorser. 
Chittv,  Bills,  375.  In  such  cases  the  fact  that  the  bill  was  drawn 
upon  him  does  not  incapacitate  him  from  acquiring  the  rights  of  an 
indorsee.     No  reason  is  apparent  for  a  different  rule  where  the 


SPEAR  V.   PRATT.  87 

drawee  becomes  the  holder  by  discounting  the  bill  before  its  dis- 
honor. Uncertain  whether  the  drawer  will  put  funds  into  his  hands 
to  meet  the  bill  at  maturity,  he  may  well  refuse  to  accept,  and  yet 
may  discount  it  on  the  credit  of  both  the  drawer  and  indorser.  If  he 
does  not  accept,  he  is  as  much  a  stranger  to  it  as  any  other  person  dis- 
counting it  for  the  drawer  or  indorser;  is  but  purchasing  the  con- 
tract, and  the  contract  thus  purchased  is  that  the  drawee  will  pay  the 
bill  on  presentment,  when  it  shall  fall  due,  or,  in  case  of  his  failing 
to  do  so,  that  the  parties  whose  names  are  already  upon  it  will  pay, 
if  due  notice  of  its  dishonor  be  given  to  them.  The  promise  is  made 
by  the  parties  to  the  bill.    The  purchaser  enters  into  no  engagement. 

These  views  accord  with  the  doctrine  laid  down  in  Desha,  Sheppard, 
&  Co.  V.  Stewart,  6  Ala.  852,  a  case  which  more  closely  resembles  the 
present  than  any  we  have  been  able  to  find.  In  it  the  Supreme  Court 
of  that  State  ruled  that  the  drawees  of  a  bill  may  sue  the  drawer  or 
indorsers  after  it  has  been  dishonored,  even  though  they  obtained  the 
bill  before  its  dishonor ;  and  that  until  acceptance  they  are  strangers 
to  the  bill,  and  may  acquire  rights  to  it,  and  stand  in  the  same  con- 
dition as  any  other  holder.  It  was  said  that  there  is  no  legal  pre- 
sumption if  the  drawer  comes  into  possession  of  the  bill  previous  to 
its  dishonor,  that  he  takes  it  with  the  obligation  to  accept. 

Such  being  in  our  opinion  the  law,  it  was  not  error  that  the  Court 
of  Common  Pleas  gave  judgment  for  the  plaintiff  upon  the  case 
stated.  The  fact  is  not  distinctly  found  that  notice  of  dishonor  of 
the  bill  was  duly  given  to  the  defendants,  but  it  was  conceded  on  the 
argument  that  such  was  the  fact,  and  that  such  is  the  meaning  of 
the  case  stated.    The  judgment  is 

'Affirmed. 


[Acceptances,  apart  from  acceptance  for  honor,  may  be  classified 
as  acceptance  proper  and  virtual  acceptance.] 

SPEAK  V.  PEATT. 

Supreme  Court  of  New  York,  May,  1842.     2  Hill,  582. 

Acceptance  proper  is  the  assent  of  the  drawee  to  the  drawer's  order ;  this  assent,  by 
the  Statute,  must  be  in  writing,  on  the  bill.^ 

Assumpsit  against  the  drawee  as  acceptor  of  a  bill  of  exchange, 
the  drawee  having  simply  written  his  name  across  the  instrument. 
The  statutes  of  New  York,  which  govern  the  case,  require  acceptance 
to  be  in  writing  and  signed  by  the  acceptor.  Judgment  for  the 
plaintiff  by  direction  of  the  judge.     Motion  for  a  new  trial. 

1  N.  I.  L.  §§  149,  150,  and  see  §§  156  to  159,  inclusive,  and  Bigelow,  Bills  & 
Notes,  ch.  V.  §  2,  as  to  qualified  acceptance. 


88  acceptor's  contract. 

[Argument  not  reported.] 

CowEN,  J.  Any  words  written  by  the  drawee  on  a  bill,  not  putting 
a  direct  negative  upon  its  request,  as  "accepted,"  "presented,"  "seen," 
the  day  of  the  month,  or  a  direction  to  a  third  person  to  pay  it,  is 
prima  facie  a  complete  acceptance,  by  the  law  merchant.  Bay  ley 
on  Bills,  163,  Am.  ed.  of  1836,  and  the  cases  there  cited.  Writing 
his  name  across  the  bill,  as  in  this  case,  is  a  still  clearer  indication 
of  intent,  and  a  very  common  mode  of  acceptance.  This  is  treated 
by  the  law  merchant  as  a  written  acceptance,  —  a  signing  by  the 
drawee.  "  It  may  be,"  says  Chitty,  "  merely  by  writing  his  name 
at  tlie  bottom  or  across  the  bill ;  "  and  he  mentions  this  as  among  the 
more  usual  modes  of  acceptance.    Chit,  on  Bills,  320,  Am.  ed.  of  1839. 

It  is  supposed  that  the  rule  has  been  altered  by  1  Rev.  St.  757, 
2d  ed.,  §  6.  This  requires  the  acceptance  to  be  in  writing,  and  signed 
by  the  acceptor  or  his  agent.  The  acceptance  in  question  was,  as  we 
have  seen,  declared  by  the  law  merchant  to  be  both  a  writing  and 
signing.  The  statute  contains  no  declaration  that  it  should  be  con- 
sidered less.  An  indorsement  must  be  in  writing  and  signed;  yet 
the  name  alone  is  constantly  holden  to  satisfv  the  requisition.  No 
particular  form  of  expression  is  necessary  in  any  contract.  The 
customary  import  of  a  word,  by  reason  of  its  appearing  in  a  par- 
ticular place  and  standing  in  a  certain  relation,  is  considered  a 
written  expression  of  intent  quite  as  full  and  effectual  as  if  pains 
had  been  taken  to  throw  it  into  the  most  labored  periphrase.  It  is 
said  the  revisers,  in  their  note,  refer  to  the  French  law  as  the  basis 
of  the  legislation  which  they  recommended;  and  that  the  French 
law  requires  more  than  the  drawee's  name,  —  the  word  accepted,  at 
least.  That  may  be  so ;  but  it  is  enough  for  us  to  see  that  both  the 
terms  and  the  spirit  of  the  act  may  be  satisfied  short  of  that  word, 
and  more  in  accordance  with  the  settled  forms  of  commercial  instru- 
ments in  analogous  cases.  The  whole  purpose  was  probably  to  obviate 
the  inconveniences  of  the  old  law,  which  gave  effect  to  a  parol 
acceptance. 

New  trial  denied. 


DAVIS  V.  CLARKE. 
Queen's  Bench  of  England,  Trinity,  1844.     6  Q.  B.  16. 
Apart  from  acceptance  for  honor,  the  drawee  alone  may  accept. 

Assumpsit.  The  first  count  stated  that  "one  John  Hart,"  on 
8th  March,  1838,  "  made  his  bill  of  exchange  in  writing  and  directed 
the  same  to  the  defendant,  and  thereby  required  the  defendant  to 
pay  to  him  or  his  order  £100,"  value  received,  at  twelve  months  after 


DAVIS   V.   CLARKE.  89 

date,  which  had  elapsed,  etc.,  "  and  the  defendant  then  accepted  the 
said  bill,  and  the  said  John  Hart  then  indorsed  the  same  to  the 
plaintiff ; "  averment  of  notice  to  defendant,  promise  by  him  to  pay- 
plaintiff,  and  that  he  did  not  pay.  There  was  also  a  count  on  an 
account  stated. 

The  first  plea  denied  the  acceptance ;  the  second  the  promise ;  the 
third  alleged  a  discharge  of  defendant  by  the  Insolvent  Debtors' 
Court.  Eeplication  joining  issue  on  the  first  two  pleas,  and  travers- 
ing the  discharge  alleged  in  the  third,  on  which  issue  was  joined. 

On  the  trial  a  written  paper,  in  the  following  terms,  was  given  in 
evidence  for  the  plaintiff : 

"  £100. 

London,  8th  March,  1838. 

Twelve  months  after  date  pay  to  me  or  my  order  one  hundred 
pounds,  value  received. 

John  Hart. 
To  Mr.  John  Hart." 

Across  the  face  of  this  instrument  was  written,  in  defendant's 
hand,  "  Accepted.    H.  J.  Clarke,  payable  at  319  Strand." 

No  other  evidence  being  produced,  the  court  directed  a  nonsuit. 
Case  argued  on  a  rule  nisi  for  a  new  trial. 

[Argument  reported.] 

Lord  Denman,  C.  J.  There  is  no  authority,  either  in  the  English 
law  or  the  general  law  merchant,  for  holding  a  party  to  be  liable  as 
acceptor  upon  a  bill  addressed  to  another.  We  must  take  it  on  this 
instrument  that  the  defendant  is  different  from  the  party  to  whom  it 
is  addressed.  Polhill  v.  Walter,  3  B.  &  Ad.  114,  and  Jackson  v.  Hud- 
son, 2  Campb.  447,  are  authorities  showing  that  the  defendant  here 
cannot  be  sued  as  acceptor.  In  Jackson  v.  Hudson,  Lord  Ellen- 
borough  treated  an  acceptance  by  a  party  not  addressed  as  "  contrary 
to  the  usage  and  custom  of  merchants." 

Patteson,  J.  ISTo  previous  case  seems  to  be  exactly  like  this.  In 
Jackson  v.  Hudson,  2  Campb.  447,  there  was  one  acceptance  by  the 
party  to  whom  the  bill  was  addressed,  prior  to  the  acceptance  by  the 
defendant.  In  Gray  v.  Milner,  8  Taunt.  739,  no  party  was  named  in 
the  address ;  and  I  must  say  that  the  decision  in  that  case  appears  to 
me  to  go  to  the  extremity  of  what  is  convenient.  It  may  be  consid- 
ered as  having  been  decided  on  the  ground  that  the  acceptance  was 
not  inconsistent  with  the  address,  so  that  the  acceptor  might  be 
deemed  to  have  admitted  himself  to  be  the  party  addressed.  But  here 
another  person,  the  drawer  himself,  is  named  in  the  address.  I  do 
not  know  that  a  party  may  not  address  a  bill  to  himself,  and  accept, 


90  acceptor's  contract. 

though  the  proceeding  would  be  absurd  enough.  Then  it  is  said  that 
the  defendant  is  estopped;  but  that  cannot  be  supported  where  the 
instrument  shows,  on  its  face,  that  he  cannot  be  the  acceptor. 

WiLLiAiis,  J.  The  only  question  is,  whether  the  defendant  is  such 
an  acceptor  as  is  described  in  the  dechiration;  that  is,  of  a  bill  of 
exchange  directed  to  him.  No  doubt  this  can  be  so  only  where  he  is 
the  drawee ;  but  here  the  bill  is  not  addressed  to  the  defendant  at  all. 
This  is  therefore  not  an  acceptance  within  the  custom  of  merchants. 

CoLEKiDGB,  J.  The  safe  course  is  to  adhere  to  the  mercantile  rule 
that  an  acceptance  can  be  made  only  by  the  party  addressed,  or  for 
his  honor.  Here  the  last  is  not  pretended,  and  the  first  cannot  be 
presumed.  If  the  John  Hart  addressed  is  different  from  the  John 
Hart  who  draws,  there  is  still  no  acceptance;  if  the  same,  then  the 
instrument  is  a  promissory  note,  and  not  a  bill  of  exchange.^ 

Rule  discharged. 


COOLIDGE  V.  PAYSON. 

Supreme  Court  of  the  United  States,  February,  1817.     2  Wheat.  66. 

Virtual  acceptance  is,  Jirst,  acceptance  on  a  separate  paper,^  or  is  a  promise  to  ac- 
cept, followed  in  either  case  by  a  purchase  for  value  on  the  faith  thereof.^ 

Action  by  the  holders  of  a  bill  of  exchange  against  the  acceptors. 
The  facts  appear  in  the  opinion. 

[Argument  not  reported.] 

Marshall,  C.  J.  This  suit  was  instituted  by  Payson  &  Co.,  as 
indorsers  *  of  a  bill  of  exchange,  drawn  by  Cornthwait  &  Gary,  pay- 
able to  the  order  of  John  Eandall,  against  Coolidge  &  Co.,  as  the 
acceptors. 

At  the  trial,  the  holders  of  the  bill,  on  which  the  name  of  John 
Eandall  was  indorsed,  offered,  for  the  purpose  of  proving  the  indorse- 
ment, an  affidavit  made  by  one  of  the  defendants  in  the  cause,  in 
order  to  obtain  a  continuance,  in  which  he  referred  to  the  bill  in 
terms  which,  they  supposed,  implied  a  knowledge  on  his  part  that 
the  plaintiffs  were  the  rightful  holders.  The  defendants  objected  to 
the  bills  going  to  the  jury  without  further  proof  of  the  indorsement ; 
but  the  court  determined  that  it  should  go  with  the  affidavit  to  the 
jury,  who  might  be  at  liberty  to  infer  from  thence  that  the  indorse- 
ment was  made  by  Eandall,  To  this  opinion  the  counsel  for  the 
defendants  in  the  Circuit  Court  excepted,  and  this  court  is  divided 
on  the  question  whether  the  exception  ought  to  be  sustained. 

On  the  trial,  it  appeared  that  Coolidge  &  Co.  held  the  proceeds 

1  N.  I.  L.  §  147.  2  N.  I.  L.  §  151. 

'  Id.  §§  151, 152.  *  Apparently  a  slip  for  indorsees. 


COOLIDGE   V.   PAYSON.  91 

of  part  of  the  cargo  of  The  Hiram,  claimed  by  Comthwait  &  Gary, 
which  had  been  captured  and  libelled  as  lawful  prize.  The  cargo 
had  been  acquitted  in  the  district  and  circuit  courts;  but  from  the 
sentence  of  acquittal  the  captors  had  appealed  to  this  court.  Pend- 
ing the  appeal,  Cornthwait  &  Co.  transmitted  to  Coolidge  &  Co. 
a  bond  of  indemnity,  executed  at  Baltimore,  with  scrolls  in  the  place 
of  seals,  and  drew  on  them  for  $2700.  This  bill  was  also  payable 
to  the  order  of  Eandall,  and  indorsed  by  him  to  Payson  &  Co.  It 
was  presented  to  Coolidge  &  Co.  and  protested  for  non-acceptance. 
After  its  protest,  Coolidge  &  Co.  wrote  to  Cornthwait  &  Cary  a  letter, 
in  which,  after  acknowledging  the  receipt  of  a  letter  from  them, 
with  the  bond  of  indemnity,  they  say :  "  This  bond,  conformably 
to  our  laws,  is  not  executed  as  it  ought  to  be;  but  it  may  be  other- 
wise in  your  State.  It  will,  therefore,  be  necessary  to  satisfy  us 
that  the  scroll  is  usual  and  legal  with  you  instead  of  a  seal.  We 
notice  no  seal  to  any  of  the  signatures."  "  We  shall  write  our  friend 
Williams  by  this  mail,  and  will  state  to  him  our  ideas  respecting  the 
bond,  which  he  will  probably  determine.  If  Mr.  W.  feels  satisfied 
on  this  point,  he  will  inform  you,  and  in  that  case  your  draft  for 
$2000  will  be  honored." 

On  the  same  day,  Coolidge  &  Co.  addressed  a  letter  to  Mr. 
Williams  in  which,  after  referring  to  him  the  question  respecting 
the  legal  obligations  of  the  scroll,  they  say:  "You  know  the  object 
of  the  bond,  and,  of  course,  see  the  propriety  of  our  having  one  not 
only  legal,  but  signed  by  sureties  of  unquestionable  responsibility, 
respecting  which  we  shall  wholly  rely  on  your  judgment.  You 
mention  the  last  surety  as  being  responsible;  what  think  you  of 
the  others  ?  " 

In  his  answer  to  this  letter  Williams  says :  "  I  am  assured  that 
the  bond  transmitted  in  my  last  is  sufficient  for  the  purpose  for 
which  it  was  given,  provided  the  parties  possess  the  means;  and  of 
the  last  signer,  I  have  no  hesitation  in  expressing  my  firm  belief 
of  his  being  able  to  meet  the  whole  amount  himself.  Of  the  prin- 
cipals I  cannot  speak  with  so  much  confidence,  not  being  well  ac- 
quainted with  their  resources.  Under  all  circumstances,  I  should  not 
feel  inclined  to  withhold  from  them  any  portion  of  the  funds  for 
which  the  bond  was  given." 

On  the  day  on  which  the  letter  was  written,  Cornthwait  &  Gary 
called  on  Williams,  to  inquire  whether  he  had  satisfied  Coolidge  & 
Co.  respecting  the  bond.  Williams  stated  the  substance  of  the  letter 
he  had  written,  and  read  to  him  a  part  of  it.  One  of  the  firm  of 
Payson  &  Co.  also  called  on  him  to  make  the  same  inquiry,  to  whom 
he  gave  the  same  information,  and  also  read  from  his  letter-book  the 
letter  he  had  written. 

Two  days  after  this,  the  bill  in  the  declaration  mentioned  was 
drawn  by  Cornthwait  &  Cary,  and  paid  to  Payson  &  Co.  in  part 


92  acceptor's  contract. 

of  the  protested  bill  of  $2700,  by  whom  it  was  presented  to  Coolidge 
&  Co.,  who  refused  to  accept  it,  on  which  it  was  protested,  and  this 
action  brought  by  the  holders. 

On  this  testimony,  the  counsel  for  the  defendants  insisted  that  the 
plaintiffs  were  not  entitled  to  a  verdict ;  but  the  court  instructed  the 
jury,  that  if  they  were  satisfied  that  Williams,  on  the  application  of 
the  plaintiffs,  made  after  seeing  the  letter  from  Coolidge  &  Co.  to 
Cornthwait  &  Gary,  did  declare  that  he  was  satisfied  with  the  bond 
referred  to  in  that  letter,  as  well  with  respect  to  its  execution  as  to 
the  sufficiency  of  the  obligors  to  pay  the  same;  and  that  the  plain- 
tiffs, upon  the  faith  and  credit  of  the  said  declaration,  and  also  of  the 
letter  to  Cornthwait  &  Cary,  and  without  having  seen  or  known  the 
contents  of  the  letter  from  Coolidge  &  Co.  to  Williams,  did  receive 
and  take  the  bill  in  the  declaration  mentioned,  they  were  entitled 
to  recover  in  the  present  action;  and  that  it  was  no  legal  objection  to 
such  recovery  that  the  promise  to  accept  the  present  bill  was  made  to 
the  drawers  thereof  previous  to  the  existence  of  such  bill,  or  that  the 
bill  had  been  taken  in  part  payment  of  a  pre-existing  debt,  or  that 
the  said  Williams,  in  making  the  declarations  aforesaid,  did  exceed 
the  private  instructions  given  to  him  by  Coolidge  &  Co.  in  their 
letter  to  him. 

To  this  charge  the  defendants  excepted;  a  verdict  was  given  for 
the  plaintiffs,  and  judgment  rendered  thereon,  which  judgment  is 
now  before  this  court  on  a  writ  of  error. 

The  letter  from  Coolidge  &  Co.  to  Cornthwait  &  Cary  contains 
no  reference  to  their  letter  to  Williams,  which  might  suggest  the 
necessity  of  seeing  that  letter,  or  of  obtaining  information  respecting 
its  contents.  They  refer  Cornthwait  &  Cary  to  Williams,  not  for 
the  instructions  they  had  given  him,  but  for  his  judgment  and  de- 
cision on  the  bond  of  indemnity.  Under  such  circumstances,  neither 
the  drawers  nor  the  holders  of  the  bill  could  be  required  to  know,  or 
could  be  affected  by,  the  private  instructions  given  to  Williams.  It 
was  enough  for  them,  after  seeing  the  letter  from  Coolidge  &  Co. 
to  Cornthwait  &  Cary  to  know  that  Williams  was  satisfied  with  the 
execution  of  the  bond  and  the  sufficiency  of  the  obligors,  and  had 
informed  Coolidge  &  Co.  that  he  was  so  satisfied. 

This  difficulty  being  removed,  the  question  of  law  which  arises 
from  the  charge  given  by  the  court  to  the  jury  is  this :  Does  a  promise 
to  accept  a  bill  amount  to  an  acceptance  to  a  person  who  has  taken 
it  on  the  credit  of  that  promise,  although  the  promise  was  made 
before  the  existence  of  the  bill,  and  although  it  is  drawn  in  favor  of 
a  person  who  takes  it  for  a  pre-existing  debt? 

In  the  case  of  Pillans  and  Rose  v.  Van  Mierop  and  Hopkins, 
3  Burr.  1663,  the  credit  on  which  the  bill  was  drawn  was  given  before 
the  promise  to  accept  was  made,  and  the  promise  was  made  previous 
to  the  existence  of  the  bill.    Yet  in  that  case,  after  two  arguments 


COOLIDGE   V.   PAYSON.  93 

and  much  consideration,  the  Court  of  King's  Bench  (all  the  judges 
being  present  and  concurring  in  opinion)  considered  the  promise  to 
accept  as  an  acceptance. 

Between  this  case  and  that  under  the  consideration  of  the  court 
no  essential  distinction  is  perceived.  But  it  is  contended  that  the 
authority  of  the  case  of  Pillans  and  Hose  v.  Van  Mierop  and  Hopkins 
is  impaired  by  subsequent  decisions. 

In  the  case  of  Pierson  v.  Dimlop  et  al.,  Cowp.  571,  the  bill  was 
drawn  and  presented  before  the  conditional  promise  was  made  on 
which  the  suit  was  instituted.  Although,  in  that  case,  the  holder  of 
the  bill  recovered  as  on  an  acceptance,  it  is  supposed  that  the  prin- 
ciples laid  down  by  Lord  Mansfield,  in  delivering  his  opinion,  contra- 
dict those  laid  down  in  Pillans  and  Eose  v.  Van  Mierop  and  Hopkins. 
His  lordship  observes :  "  It  has  been  truly  said,  as  a  general  rule, 
that  the  mere  answer  of  a  merchant  to  the  drawer  of  a  bill,  saying, 
*he  will  duly  honor  it,'  is  no  acceptance,  unless  accompanied  with 
circumstances  which  may  induce  a  third  person  to  take  the  bill  by 
indorsement ;  but  if  there  are  any  such  circumstances,  it  may  amount 
to  an  acceptance,  though  the  answer  be  contained  in  a  letter  to  the 
drawer." 

If  the  case  of  Pillans  and  Rose  v.  Van  Mierop  and  Hopkins  had 
been  understood  to  lay  down  the  broad  principle  that  a  naked  prom- 
ise to  accept  amounts  to  an  acceptance,  the  case  of  Pierson  v.  Dunlop 
certainly  narrows  that  principle  so  far  as  to  require  additional  cir- 
cumstances proving  that  the  person  on  whom  the  bill  was  drawn,  was 
bound  by  his  promise,  either  because  he  had  funds  of  the  drawer  in 
his  hands,  or  because  his  letter  had  given  credit  to  the  bill,  and 
induced  a  third  person  to  take  it. 

It  has  been  argued,  that  those  circumstances  to  which  Lord  Mans- 
field alludes,  must  be  apparent  on  the  face  of  the  letter.  But  the 
court  can  perceive  no  reason  for  this  opinion.  It  is  neither  warranted 
by  the  words  of  Lord  Mansfield  nor  by  the  circumstances  of  the  case 
in  which  he  used  them.  "  The  mere  answer  of  a  merchant  to  the 
drawer  of  a  bill,  saying  he  will  duly  honor  it,  is  no  acceptance  unless 
accompanied  with  circumstances,"  etc.  The  answer  must  be  "  accom- 
paniecl  with  circumstances ; "  but  it  is  not  said  that  the  answer  must 
contain  those  circumstances.  In  the  case  of  Pierson  v.  Dunlop  the 
answer  did  not  contain  those  circumstances.  They  were  not  found 
in  the  letter,  but  were  entirely  extrinsic.  Nor  can  the  court  perceive 
any  reason  for  distinguishing  between  circumstances  which  appear  in 
the  letter  containing  the  promise,  and  those  which  are  derived  from 
other  sources.  The  great  motive  for  construing  a  promise  to  accept, 
as  an  acceptance,  is,  that  it  gives  credit  to  the  bill,  and  may  induce  a 
third  person  to  take  it.  If  the  letter  be  not  shown,  its  contents,  what- 
ever they  may  be,  can  give  no  credit  to  the  bill ;  and  if  it  be  shown, 
an  absolute  promise  to  accept  will  give  all  the  credit  to  the  bill  which 


94  acceptor's  contract. 

a  full  confidence  that  it  will  be  accepted  can  give  it.  A  conditional 
promise  becomes  absolute  when  the  condition  is  performed. 

In  the  case  of  Mason  v.  Hunt,  Doug.  296,  Lord  Mansfield  said, 
"  There  is  no  doubt  but  an  agreement  to  accept  may  amount  to  an 
acceptance;  and  it  may  be  couched  in  such  words  as  to  put  a  third 
person  in  a  better  condition  than  the  drawee.  If  one  man,  to  give 
credit  to  another,  makes  an  absolute  promise  to  accept  his  bill,  the 
drawee,  or  any  other  person,  may  show  such  promise  upon  the  ex- 
change, to  get  credit,  and  a  third  person,  who  should  advance  his 
money  upon  it  would  have  nothing  to  do  with  the  equitable  circum- 
stances which  might  subsist  between  the  drawer  and  acceptor." 

What  is  it  that  "  the  drawer  or  any  other  person  may  show  upon 
the  exchange  "  ?  It  is  the  promise  to  accept  —  the  naked  promise. 
The  motive  to  this  promise  need  not,  and  cannot  be  examined.  The 
promise  itself,  when  shown,  gives  the  credit;  and  the  merchant  who 
makes  it  is  bound  by  it. 

The  cases  cited  from  Cowper  and  Douglass  are,  it  is  admitted, 
cases  in  which  the  bill  is  not  taken  for  a  pre-existing  debt,  but  is  pur- 
chased on  the  credit  of  the  promise  to  accept.  But  in  the  case  of 
Pillans  V.  Van  Mierop  the  credit  was  given  before  the  promise  was 
received  or  the  bill  drawn;  and  in  all  cases  the  person  who  receives 
such  a  bill  in  payment  of  a  debt,  will  be  prevented  thereby  from 
taking  other  means  to  obtain  the  money  due  to  him.  Any  ingredient 
of  fraud  would,  unquestionably,  affect  the  whole  transaction;  but 
the  mere  circumstance  that  the  bill  was  taken  for  a  pre-existing  debt 
has  not  been  thought  sufficient  to  do  away  the  effect  of  a  promise  to 
accept. 

In  the  case  of  Johnson  and  another  v.  Collings,  1  East,  98,  Lord 
Kenyon  shows  much  dissatisfaction  with  the  previous  decisions  on  this 
subject;  but  it  is  not  believed  that  the  judgment  given  in  that  case 
would,  even  in  England,  change  the  law  as  previously  established.  In 
the  case  of  Johnson  v.  Collings,  the  promise  to  accept  was  in  a  letter 
to  the  drawer,  and  is  not  stated  to  have  been  shown  to  the  indorsee. 
Consequently,  the  bill  does  not  appear  to  have  been  taken  on  the 
credit  of  that  promise.  It  was  a  mere  naked  promise,  unaccompanied 
with  circumstances  which  might  give  credit  to  the  bill.  The  counsel 
contended  that  this  naked  promise  amounted  to  an  acceptance;  but 
the  court  determined  otherwise.  In  giving  his  opinion,  Ijc  Blanc,  J., 
lays  down  the  rule  in  the  words  used  by  Lord  Mansfield,  in  the  case 
of  Pierson  v.  Dunlop ;  and  Lord  Kenyon  said,  that  "  this  was  carry- 
ing the  doctrine  of  implied  acceptances  to  the  utmost  verge  of  the 
law,  and  he  doubted  whether  it  did  not  even  go  beyond  it."  In  Clark 
and  others  v.  Cock,  4  East,  57,  the  judges  again  express  their  dissat- 
isfaction with  the  law  as  established,  and  their  regret  that  any  other 
act  than  a  written  acceptance  on  the  bill  had  ever  been  deemed  an 
acceptance.     Yet  they  do  not  undertake  to  overrule  the  decisions 


EXCHANGE    BANK    OF   ST.    LOUIS   V.    EICE.  95 

which  they  disapprove.  On  the  contrary,  in  that  case,  they  unani- 
mously declared  a  letter  to  the  drawer  promising  to  accept  the  bill, 
which  was  shown  to  the  person  who  held  it,  and  took  it  on  the  credit 
of  that  letter  to  be  a  virtual  acceptance.  It  is  true,  in  the  case  of 
Clark  V.  Cock,  the  bill  was  made  before  the  promise  was  given,  and 
the  judges,  in  their  opinions,  use  some  expressions  which  indicate  a 
distinction  between  bills  drawn  before  and  after  the  date  of  the  prom- 
ise ;  but  no  case  has  been  decided  on  this  distinction ;  and  in  Pillans 
and  Eose  v.  Van  Mierop  and  Hopkins,  the  letter  was  written  before 
the  bill  was  drawn.^ 

The  court  can  perceive  no  substantial  reason  for  this  distinction. 
The  prevailing  inducement  for  considering  a  promise  to  accept,  as  an 
acceptance,  is,  that  credit  is  thereby  given  to  the  bill.  Now,  this 
credit  is  given  as  entirely  by  a  letter  written  before  the  date  of  the  bill 
as  by  one  written  afterwards. 

It  is  of  much  importance  to  merchants  that  this  question  should 
be  at  rest.  Upon  a  review  of  the  cases  which  are  reported,  this  court 
is  of  opinion  that  a  letter  written  within  a  reasonable  time  before  or 
after  the  date  of  a  bill  of  exchange,  describing  it  in  terms  not  to  be 
mistaken,  and  promising  to  accept  it,  is,  if  shown  to  the  person  who 
afterwards  takes  the  bill  on  the  credit  of  the  letter,  a  virtual  accept- 
ance binding  the  person  who  makes  the  promise.^  This  is  such  a 
case.  There  is,  therefore,  no  error  in  the  judgment  of  the  Circuit 
Court,  and  it  is  affirmed  with  costs. 

Judgment  affirmed. 


EXCHANGE   BANK   OF    ST.    LOUIS   v.   EICE. 

Supreme  Court  of  Massachusetts,  March,  1871.     107  Mass.  37. 

(See  98  Mass.  288.) 

A  promise  to  accept,  falling  short  of  virtual  acceptance,  may  make  a  commou-Iaw 
contract,  provided  there  is  consideration  and  privity  of  contract. 

Appeal  from  a  judgment  for  the  defendant  in  contract  on  the 
following  agreed  statement  of  facts : 

1  N.  L  L.  §  152. 

2  The  Statute  speaks  only  of  written  promises  made  before  the  bill  is  dra'wn  ;  this  is 
not  to  be  taken  as  meaning  that  a  written  promise  made  ajler  the  bill  was  drawn,  may 
not  be  treated  by  the  holder  as  an  acceptance  ,if  he  elects  so  to  treat  it,  provided,  of 
course,  that  he  has  taken  the  bill  in  reliance  thereon.  "  It  is  a  settled  rule  that  a 
promise  in  writing  to  accept  a  bill  of  exchange,  drawn  or  to  be  drawn,  is  a  virtual  ac- 
ceptance in  favor  of  a  person  to  whom  the  promise  is  shown  and  who  takes  the  bill  on 
the  credit  of  such  promise.  This  subject  was  carefully  considered  by  the  court  in  the 
recent  case  of  Exchange  Bank  of  St.  Louis  v.  Rice,  98  Mass.  288,  and  it  is  sufficient  to 
refer  to  the  discussion  in  that  case."  Morton,  J.,  in  Central  Savings  Bank  v-  Kichards, 
109  Mass.  413,  414.    The  promise  in  this  case  was  sent  by  telegraph. 


96  acceptor's  contract. 

"  On  March  8,  1865,  John  P.  Hill,  at  St.  Louis,  drew  on  the  de- 
fendants, commission  merchants  in  Boston,  a  draft  for  $3300,  pay- 
able thirty  days  after  date  to  the  order  of  E.  R.  Pitman  &  Co.,  and 
containing  on  its  face  a  memorandum  in  the  terms  following: 
'  against  12  bales  cotton.'  On  the  same  day  the  draft  was  indorsed 
to  and  discounted  in  the  usual  course  of  business  by  the  plaintiffs, 
and  on  March  15  was  presented  by  them  to  the  defendants,  at  Boston, 
who  caused  it  to  be  noted  for  non-acceptance.  On  March  8,  Hill 
wrote  to  the  defendants  as  follows :  '  I  ship  you  to-day  per  ]\Ierritt's 
Express  12  bales,  weighing  5489  pounds,  on  which  I  have  drawn  on 
you  at  30  days  for  $3300.'  To  this  letter  the  defendants  replied  on 
March  14  as  follows :  '  We  now  have  the  pleasure  to  acknowledge 
your  favor  of  the  8th.  Your  shipment  12  bales  of  cotton  per  Mer- 
ritt's  Express  will  receive  due  attention.  Bill  of  lading  not  at  hand. 
Your  draft  for  $3300  is  excessive,  particularly  as  we  shall  have  no 
margin  on  previous  shipments,  as  the  market  now  looks.  We  will 
honor  the  same,  but  shall  expect  you,  on  receipt  of  this,  to  make  us 
shipment  of  cotton  to  cover  the  margin.'  And  on  March  15  they 
again  wrote  to  Hill  as  follows :  '  Market  for  cotton  continues  weak. 
Have  no  bill  lading  12  bales  reported  as  shipped  yesterday,  and  we 
have  felt  obliged  therefore  to  have  your  draft  for  $3300  noted  for 
non-acceptance.  When  bill  lading  is  received,  will  accept  draft.' 
The  said  bill  of  lading  of  the  cotton  ran  to  the  defendants  or  order, 
and  was  received  by  them  March  17,  1865. 

"  The  defendants'  letter  of  March  15  was  shown  to  the  plaintiffs 
by  E.  E.  Pitman  &  Co.,  March  22,  1865.  The  plaintiffs  thereupon 
procured  said  letter,  and  the  duplicate  bill  of  lading,  of  Pitman  & 
Co.,  and  on  March  27  again  presented  the  draft,  with  the  defendants' 
said  letter  and  the  duplicate  bill  of  lading  attached,  to  the  defendants 
for  acceptance.  But  the  defendants  declined  to  accept  the  same,  and 
afterwards  declined  to  pa}^,  and  they  have  never  paid  the  same  or  any 
part  thereof,  and  the  same  was  duly  protested  for  non-acceptance  and 
non-payment.  The  twelve  bales  of  cotton  were  received  by  the  de- 
fendants on  April  17,  and  were  sold  by  them  on  April  21  for  $1349 
net,  which  sum  they  credited  in  their  account  with  Hill,  upon  which 
a  balance  then  was  and  still  is  due  to  the  defendants." 

[Argument  reported.] 

Gray,  J.  It  has  already  been  decided  in  this  case,  upon  proof  of 
substantially  the  same  facts  which  are  now  agreed  by  the  parties,  that 
the  plaintiffs  could  not  sue  the  defendants  as  acceptors  of  the  draft, 
because  their  promise  to  the  drawer  to  accept  it,  having  been  made 
after  the  draft  had  been  negotiated  to  the  plaintiffs,  did  not  amount 
to  an  acceptance;  and  the  memorandum  at  the  foot  of  the  draft, 
that  it  was  drawn  against  twelve  bales  of  cotton,  could  have  no  more 


EXCHANGE   BANK   OF  ST.   LOUIS  V.   RICE.  97 

effect  to  charge  the  defendants  as  acceptors  than  the  mere  signatnre 
of  the  drawer,  which  of  itself  always  imports  a  promise  that  he  will 
have  funds  in  the  hands  of  the  drawee  to  meet  the  draft.  98  Mass. 
288. 

The  defendants'  promise  to  the  drawer  to  accept  the  draft  was  a 
mere  chose  in  action,  not  negotiable,  and  upon  which  no  one  but  he 
to  whom  it  was  made  could  maintain  an  action.  Worcester  Bank  v. 
Wells,  8  Met.  107 ;  Luff  v.  Pope,  5  Hill,  413,  and  7  Hill,  577. 

The  general  rule  of  law  is,  that  a  person  who  is  not  a  party  to  a 
simple  contract,  and  from  whom  no  consideration  moves,  cannot  sue 
on  the  contract,  and  consequently  that  a  promise  made  by  one  person 
to  another,  for  the  benefit  of  a  third  person  who  is  a  stranger  to  the 
consideration,  will  not  support  an  action  by  the  latter.  And  the 
recent  decisions  in  this  Commonwealth  and  in  England  have  tended 
to  uphold  the  rule  and  to  narrow  the  exceptions  to  it. 

The  unguarded  expressions  of  Chief  Justice  Shaw  in  Carnegie  v. 
Morrison,  2  Met.  381,  and  Mr.  Justice  Bigelow  in  Brewer  v.  Dyer, 
7  Cush.  337,  to  the  contrar}^,  on  which  the  learned  counsel  for  the 
plaintiffs  relied  at  the  argument,  were  afterwards,  and  while  those 
two  distinguished  judges  continued  to  hold  seats  upon  this  bench, 
qualified,  the  limits  of  the  doctrine  defined,  and  a  disinclination  re- 
peatedly expressed  to  admit  new  exceptions  to  the  general  rule,  in 
unanimous  judgments  of  the  court,  drawn  up  by  Mr.  Justice  Metcalf, 
and  marked  by  his  characteristic  legal  learning  and  cautious  pre- 
cision of  statement.  Mellen  v.  Whipple,  1  Gray,  317 ;  Millard  v.  Bald- 
win, 3  Gray,  484;  Field  v.  Crawford,  6  Gray,  116;  Dow  v.  Clark, 
7  Gray,  198.  Those  judgments  have  since  been  treated  as  settling  the 
law  of  Massachusetts  upon  this  subject.  Colburn  v.  Phillips,  13 
Gray,  64;   Flint  v.  Pierce,  99  Mass.  68. 

The  first  and  principal  exception  stated  by  Mr.  Justice  Metcalf 
to  the  general  rule  consists  of  those  cases  in  which  the  defendant  has 
in  his  hands  money  which  in  equity  and  good  conscience  belongs  to 
the  plaintiff,  as  where  one  person  receives  from  another  money  or 
property  as  a  fund  from  which  certain  creditors  of  the  depositor  are 
to  be  paid,  and  promises,  either  expressly,  or  by  implication  from  his 
acceptance  of  the  money  or  property  without  objection  to  the  terms 
on  which  it  is  delivered  to  him,  to  pay  such  creditors.  That  class  of 
cases,  as  was  pointed  out  in  1  Gray,  322,  includes  Carnegie  v.  Morri- 
son and  most  of  the  earlier  cases  in  this  Commonwealth,  as  well  as 
the  later  cases  of  Frost  v.  Gage,  1  Allen,  262,  and  Putnam  v.  Field, 
103  Mass.  556. 

The  only  illustration  which  the  decisions  of  this  court  afford  of  Mr. 
Justice  Metcalf's  second  class  of  exceptions  is  Felton  v.  Dickinson,  10 
Mass.  287,  in  which  it  was  held,  in  accordance  with  a  number  of  early 
English  authorities,  and  hardly  argued  against,  that  a  son  might  sue 
upon  a  promise  made  for  his  benefit  to  his  father.    Those  cases,  with 

7 


98  acceptor's  contract. 

the  proposition  on  wliich  they  have  sometimes  been  supposed  to  rest, 
that,  by  reason  of  the  near  relation  between  parent  and  child,  the 
latter  might  be  thought  to  have  an  interest  in  the  consideration  and 
the  contract,  and  the  former  to  have  entered  into  the  contract  as  his 
agent,  are  not  now  law  in  England.  Tweddle  v.  Atkinson,  1  B.  &  S. 
393;  Addison  on  Con.  (6th  ed.)  1040;  Dicey  on  Parties,  84.  And 
this  case  does  not  require  us  to  consider  whether  they  ought  still  to 
be  followed  here. 

The  third  exception  admitted  by  Mr.  Justice  Metcalf  is  the  case  of 
Brewer  v.  Dyer,  7  Cush.  337,  in  which  the  defendant  made  a  written 
promise  to  the  lessee  of  a  shop  to  take  his  lease  (which  was  under 
seal)  and  pay  the  rent  to  the  lessor  according  to  its  terms,  entered 
into  possession  of  the  shop  with  the  lessor's  knowledge,  paid  him  the 
rent  quarterly  for  a  year,  and  then  before  the  expiration  of  the  lease 
left  the  shop,  and  was  held  liable  to  an  action  by  the  lessor  for  the 
rent  subsequently  accruing.  That  case  may  perhaps  be  supported  on 
the  ground  that  such  payment  and  receipt  of  the  rent,  after  the 
agreement  between  the  defendant  and  the  lessee,  warranted  the  infer- 
ence of  a  direct  promise  by  the  defendant  to  the  lessor  to  pay  the 
rent  to  him  for  the  residue  of  the  term.  See  McFarlan  v.  Watson, 
3  Comst.  286.  It  certainly  cannot  be  reconciled  with  the  later  author- 
ities without  limiting  it  to  its  own  special  circumstances,  and  affords 
no  safe  guide  in  the  decision  of  the  present  case. 

The  plaintiffs  are  then  obliged  to  fall  back  upon  the  first  exception 
to  the  general  rule.  But  they  fail  to  bring  their  case  wdthin  that 
exception  or  within  any  of  the  authorities  to  which  they  have  re- 
ferred us. 

In  Carnegie  v.  Morrison,  2  Met.  381,  the  defendants,  having  funds 
in  cash  or  credit  of  the  plaintiffs'  debtor,  gave  him  a  letter  of  credit, 
which  was  shown  to  the  plaintiffs,  and  on  the  faith  of  which  they 
drew  the  bill  for  the  amount  of  which  they  sued  the  defendants ;  and 
the  drawing  of  that  bill,  whereby  they  made  themselves  liable  to  the 
drawee  ^  thereof,  was  a  consideration  moving  from  them.  In  Lilly  v. 
Hays,  5  Ad.  &  E.  548 ;  s.  c.  1  ISTev.  &  Per.  26,  the  defendant,  as  the 
jury  found,  had  authorized  the  plaintiff  to  be  told  that  the  defendant 
had  received  the  money  to  his  use,  and  thus  promised  the  plaintiff  to 
pay  it  to  him.  So  in  Walker  v.  Eostron,  9  M.  &  W.  411,  the  defend- 
ant had  promised  the  plaintiff  to  pay  the  sum  in  question.  And  the 
rule  established  by  the  modern  cases  in  England,  as  laid  down  in  the 
text  books  cited  for  the  plaintiffs,  does  not  permit  the  person  for 
wliose  benefit  a  promise  is  made  to  another  person  from  whom  the 
only  consideration  moves  to  maintain  an  action  against  the  promisor, 
unless  the  latter  has  also  made  an  express  promise  to  the  plaintiff,  or 
the  promisee  acted  as  the  plaintiff's  agent  merely.     Met.  Con.  209; 

*  A  slip  for  payee. 


EXCHANGE   BANK   OF   ST.   LOUIS   V.   EICE.  99 

Addison  on  Con.  (6th  ed.)  630,  1041;  Chit.  Con.  (8th  ed.)  53. 
Where  the  promisee  is  in  fact  acting  as  the  agent  of  a  third  person, 
although  that  is  unknown  to  the  promisor,  the  principal  is  the  real 
party  to  the  contract,  and  may  therefore  sue  in  his  own  name  on  the 
promise  made  to  his  agent.  Sims  v.  Bond,  5  B.  &  Ad.  389 ;  s.  c. 
2  Nev.  &  Man.  608;  Huntington  v.  Knox,  7  Cush.  371;  Barry  v. 
Page,  10  Gray,  398;  Hunter  v.  Giddings,  97  Mass.  41;  Ford  v. 
Williams,  21  How.  287. 

In  the  case  at  bar  the  plaintiffs  had  acquired  no  title  in  the  cotton 
against  which  the  draft  was  drawn.  The  bill  of  lading  was  not  at- 
tached to  the  draft,  or  made  payable  to  the  holder  thereof,  or  deliv- 
ered to  the  plaintiffs.  The  case  is  thus  distinguished  from  Allin  v. 
Williams,  12  Pick.  297,  and  Michigan  State  Bank  v.  Gardner,  15 
Gray,  362,  cited  at  the  argument.  The  cotton  was  not  of  sufficient 
value  to  pay  the  draft,  and  the  balance  of  account  between  the  defend- 
ants and  the  drawer,  at  the  time  of  their  receipt  and  sale  of  the 
cotton,  and  ever  since,  was  in  favor  of  the  defendants.  There  is  no 
ground,  therefore,  for  implying  a  promise  from  the  defendants  to  the 
plaintiffs  to  pay  to  them  either  the  amount  of  the  draft  or  the  pro- 
ceeds of  the  cotton.  Tiernan  v.  Jackson,  5  Pet.  580 ;  Cowperthwaite 
V.  Sheffield,  1  Sandf.  416,  and  3  Comst.  243;  Winter  v.  Drury, 
1  Selden,  525 ;  Yates  v.  Bell,  3  B.  &  Aid.  643.  The  plaintiffs  did  not 
take  the  draft,  or  make  advances,  upon  the  faith  of  any  promise  of 
the  defendants,  or  of  any  actual  receipt  by  them  of  the  cotton  or  the 
bill  of  lading,  but  solely  upon  the  faith  of  the  drawer's  signature  and 
implied  promise  that  the  defendants  should  have  funds  to  meet  the 
draft.  The  whole  consideration  for  the  defendants'  promise  moved 
from  the  drawer,  and  not  from  the  plaintiffs.  And  the  defendants 
made  no  promise  to  the  plaintiffs.  Their  only  promise  to  accept  the 
draft  was  made  to  Hill,  the  drawer,  after  the  draft  had  been  negoti- 
ated to  the  plaintiffs;  and  there  is  no  proof  that  the  defendants 
authorized  that  promise  to  be  shown  to  the  plaintiffs,  or  that  Hill,  to 
whom  that  promise  was  made,  was  an  agent  of  the  plaintiffs.  His 
relation  to  them  was  that  of  drawer  and  payee,  not  of  agent  and  prin- 
cipal. To  infer,  as  suggested  in  behalf  of  the  plaintiffs,  that  he  was 
their  agent  in  receiving  the  defendants'  promise,  so  that  they  might 
sue  thereon  in  their  own  name,  would  be  unsupported  by  any  facts 
in  the  case,  and  would  be  an  evasion  of  the  rules  of  law,  which  will 
not  allow  any  person  who  took  the  draft  before  that  promise  was 
made  to  maintain  an  action  upon  that  promise  either  as  an  acceptance 
or  a  promise  to  accept.  Judgment  for  the  defendants. 


Note.  —  In  many  of  the  States  one  foi*  whose  benefit  a  promise  is  made 
may  sue  upon  it  though  he  was  not  privy  to  the  promise  or  to  the  considera- 
tion. But  that,  in  so  far  as  it  is  received  doctrine,  is  received  as  doctrine  of 
the  common  law,  and  not,  it  is  apprehended,  as  doctrine  of  the  law  merchant 


100  acceptor's  contract. 

applicable  to  cases  like  that  supra.  And  in  any  event  the  promise  so  treated 
would  not  be  treated,  further,  as  negotiable. 

One's  rights  may,  generally  speaking,  be  transferred  to  another ;  but  the 
right  of  the  drawer  of  a  bill  of  exchange  or  of  a  cheque  to  have  his  draft 
honored,  where  he  has  such  a  right,  cannot  be  transferred  with  the  draft  to 
the  holder  of  the  same;  otherwise  there  would  be  nothing,  or  next  to  nothing 
in  the  rule  of  the  law  merchant  that  the  drawee  of  a  bill  or  cheque  is  and  can 
-be  under  no  liability  to  the  holder  (apart  from  a  sufficient  promise  to  him  to 
accei:>t)  until  he  has  accepted  the  one  or  certified  the  other.  Nor  can  the  cir- 
cumstance that  the  drawee  may  have  promised  the  drawer  that  he  will  honor 
the  draft  make  any  difference,  where  the  drawer  is  not  an  agent  of  the  holder; 
for  in  the  case  supposed  he  was  bound  to  honor  the  draft,  so  that  the  promise 
has  added  nothing  to  the  case. 

Of  course  this  is  not  saying  that  this  particular  right  of  the  drawer  may 
not  pass  to  an  assignee  in  bankruptcy  or  insolvency ;  that  is  a  very  different 
thing. 


HENEIETTA  NATIONAL  BANK  v.   STATE  NATIONAL 

BANK. 

Supreme  Court  of  Texas,  May,  1891,    80  Texas,  648. 

E.  g.  in  the  case  of  a  cheque  of  which  there  cannot  be  acceptance ;  ^  or  in  case  of 
an  iucomplete  description  of  the  instrument  in  the  promise. 

Action  on  a  promise  to  pay  a  cheque. 
[Argument  reported.] 

Gaines.  Assoc.  Justice.  This  suit  was  brought  by  the  appellee  to 
recover  of  the  Henrietta  National  Bank  and  Frank  Brown,  as  its 
receiver,  the  amount  of  a  cheque  drawn  upon  it  by  E.  F.  and 
W.  S.  Ikard. 

On  the  22d  of  July,  1887,  E.  F.  and  W.  S.  Ikard  drew  a  cheque 
on  the  defendant  bank  in  favor  of  one  T.  F.  "West  for  $1800.  West 
indorsed  and  delivered  it  to  one  Atkinson,  who  on  the  next  day 
presented  it  to  the  cashier  of  the  plaintiff  bank  at  Fort  Worth  with 
the  request  that  he  cash  it.  The  cashier  immediately  telegraphed 
the  defendant  bank  as  follows :  "  Will  you  pay  E.  F.  and  W.  S. 
Ikard's  cheque  for  $1800  on  presentation?"  The  cashier  of  the 
defendant  bank  on  the  same  day  replied  by  telegram,  "  Yes ;  will  pay 
the  Ikard  cheque."  Upon  the  receipt  of  this  telegram  the  plaintiff 
discounted  the  paper,  and  the  holder  transferred  it  to  the  bank  by 
indorsement  and  deliver3^     The  cheque  was  immediately  sent  by 

1  Cf.  N.  T.  L.  §  204.  "  Where  a  cheque  is  certified  by  the  bank  on  which  it  is 
drawn  the  certification  is  equivalent  to  acceptance."  This  is  true  only  for  certain 
special  purposes.  Certification  and  acceptance  are  not  one  and  the  same  for  all 
purposes.    See  Bigelow,  Bills  and  Notes,  67. 


HENRIETTA  NATIONAL   BANK   V.   STATE   NATIONAL   BANK.       101 

mail  to  the  defendant  bank  with  a  request  to  remit  the  amount  to  the 
plaintiff.  The  letter  reached  Henrietta  on  Sunday,  and  on  Monday 
before  banking  hours  the  directors  of  the  defendant  bank  deter- 
mined to  suspend  payment,  and  thereafter  its  doors  were  not  opened 
for  regular  business. 

The  court  having  given  judgment  for  the  plaintiff  for  the  full 
amount  of  the  cheque  and  interest,  and  the  defendants  having  ap- 
pealed, they  now  complain  in  effect  that  the  correspondence  by  tele- 
graph between  the  two  banks  did  not  sufficiently  describe  the  cheque 
so  as  to  make  the  promise  of  the  defendant  bank  an  acceptance. 
The  authority  mainly  relied  upon  by  appellants'  counsel  in  support 
of  their  contention  is  the  case  of  Coolidge  v.  Payson,  2  Wheat.  66. 
In  that  case  Chief  Justice  Marshall  says :  "  Upon  a  review  of  the 
cases  which  are  reported  this  court  is  of  opinion  that  a  letter  written 
within  a  reasonable  time  before  or  after  the  date  of  a  bill  of  exchange, 
describing  it  in  terms  not  to  be  mistaken  and  promising  to  accept  it, 
is,  if  shown  to  the  person  who  afterwards  takes  the  bill  on  the  credit 
of  the  letter,  a  virtual  acceptance  binding  the  person  who  makes  the 
promise."  The  doctrine  was  re-affirmed  in  the  same  court  in  the  cases 
of  Schimmelpennick  v.  Bayard,  1  Pet.  284,  and  Boyce  v.  Edwards, 
4  Pet.  Ill,  and  has  been  frequently  followed  in  other  courts.  Whether 
according  to  the  rules  laid  down  the  correspondence  should  show  any 
more  than  the  amount  and  character  of  the  bill  as  to  the  time  of  pay- 
ment we  need  not  here  inquire,  though  it  would  seem  that  such  a 
description  ought  to  be  sufficient  according  to  the  most  rigid  rule 
recognized  by  any  court. 

The  rule,  however,  applies  only  to  a  case  in  which  it  is  sought  to 
charge  the  defendant  as  the  acceptor  of  the  bill.  Cases  may  arise  in 
which  the  party  who  has  promised  to  accept  may  be  held  liable  upon 
the  promise,  although  such  promise  may  not  be  deemed  equivalent 
to  a  formal  acceptance.  A  practical  difference  between  an  action 
upon  an  acceptance  and  one  upon  a  promise  to  accept  is  that  the 
former  may  be  brought  by  the  holder  of  the  bill,  while  the  latter  suit 
can  only  be  maintained  by  the  party  to  whom  the  promise  is  made. 
In  this  case  the  promise  to  pay  the  bill  ^  was  made  directly  to  the 
plaintiff,  and  it  was  upon  the  faith  of  that  promise  that  the  cheque 
was  discounted.  The  suit  is  not  brought  upon  an  alleged  acceptance. 
The  petition  states  the  facts  in  detail  and  seeks  a  recovery  for  the. 
breach  of  the  promise  to  pay  the  cheque.  In  Boyce  v.  Edwards,  supra, 
the  Supreme  Court  of  the  United  States  says :  "  The  distinction  be- 
tween an  action  on  a  bill  as  an  accepted  bill  and  one  founded  on  a 
breach  of  promise  to  accept  seems  not  to  have  been  adverted  to.  But 
the  evidence  to  support  the  one  or  the  other  is  materially  different. 
To  maintain  the  former,  as  has  already  been  shown,  the  promise  must 

1  A  slip,  it  seems,  for  cheque. 


102  acceptor's  contract. 

be  applied  to  the  particular  bill  alleged  in  the  declaration  to  have 
been  accepted.  In  the  latter  the  evidence  may  be  of  a  more  general 
character,  and  the  authority  to  draw  may  be  collected  from  circum- 
stances and  extended  to  all  bills  coming  fairly  within  the  scope  of  the 
promise."  It  is  clear  that  the  promise  in  the  case  before  us  was 
sufficiently  definite  to  support  an  action  for  a  failure  or  refusal  to 
pay  the  cheque  described  in  the  petition,  if  not  sufficientl}^  specific  to 
authorize  its  being  treated  as  an  acceptance.^ 

The  cheque  offered  in  evidence  contained  the  character  and  figures 
"  $1800.00,"  but  in  the  body  a  line  appeared  to  have  been  drawn 
through  the  word  "  hundred."  If  the  word  was  intended  to  be  erased, 
it  was  a  cheque  for  $18  only;  if  not,  it  was  a  cheque  for  $1800.  The 
line  appears  to  have  been  drawn  along  the  top  of  the  word,  rather 
than  through  it,  and  it  is  not  at  all  clear  that  even  without  explana- 
tion it  should  be  held  to  be  an  erasure.  The  member  of  the  firm  who 
drew  the  cheque  testified  that  it  was  intended  to  be  a  cheque  for 
$1800,  and  that  he  thought  the  line  was  upon  the  blank  when  the 
cheque  was  written.  The  circumstances  attending  the  whole  trans- 
action leave  no  doubt  that  the  purpose  was  to  draw  a  cheque  for  the 
amount  claimed  by  the  plaintiff,  and  that  the  line  was  either  upon  the 
paper  when  the  cheque  was  drawn  and  was  not  discovered,  or  that  it 
was  subsequently  placed  there  by  some  accident.  That  it  was  com- 
petent to  prove  that  a  mark  of  this  character  was  not  intended  as  an 
erasure,  especially  when  the  figures  in  the  margin  tend  to  show  the 
same  fact,  we  have  no  doubt.  Sharswood's  Starkie  on  Ev.  500.  The 
defendants  introduced  testimony  tending  to  show  that  a  prudent 
banker  would  not  have  paid  the  cheque,  at  least  without  inquiry  as  to 
the  intention  of  the  drawers  in  executing  it.  This  may  be  true,  but 
so  far  as  this  case  is  concerned  it  is  a  fact  of  no  importance.  It  was 
nevertheless  the  duty  of  the  defendant  bank  to  pay  the  cheque.  An 
inquiry  would  have  shown  beyond  doubt  that  it  was  a  cheque  for 
$1800,  and  though  the  apparent  erasure  may  have  justified  a  delay 
of  a  reasonable  time  to  make  inquiry,  it  did  not  Justify  a  final  refusal 
to  pay. 

We  find  no  error  in  the  judgment,  and  it  is 

A-fJirmed. 

^  If  treated  as  an  acceptance,  it  could  have  been  only  acceptance  of  a  cheque,  a  very 
different  thing  from  acceptance  of  a  bill  of  exchange.  This  aspect  of  the  case  might 
have  been  shortly  disposed  of  by  saying  that  there  could  not  be  acceptance  of  a  cheque. 
See  Bigelow,  BiUs  and  Notes,  67. 


PUTNAM  NATIONAL  BANK  V.    SNOW.  103 


PUTNAM  NATIONAL  BANK  v.    SNOW. 

Supreme  Court  of  Massachusetts,  November,  1899.     172  Mass.  569 ;  52  N.  E. 

Rep.  1079. 

Or  cases  of  oral  promises,  where  the  Statute  requires  acceptance  to  be  in  writing. 

Contract,  in  nine  counts,  against  William  M.  Snow  and  Edward 
A.  Snow,  copartners  as  Snow  and  Company.  The  ninth  count,  which 
is  the  only  one  material  to  be  stated,  alleged  that  in  1894  the  defend- 
ants entered  into  an  agreement  with  Robert  Long,  by  which  he  was 
to  ship  oranges  from  Florida  to  them  in  Boston,  and  in  consideration 
therefor  the  defendants  agreed  with  Long  in  writing  that  as  ship- 
ments of  oranges  were  made,  he  might  draw  upon  the  defendants  for 
an  amount  equal  to  $1.10  for  each  box  of  oranges  so  shipped,  and  that 
they  would  accept  and  pay  such  drafts,  and  the  defendants  also 
promised  the  plaintiff  that  they  would  accept  and  pay  such  drafts; 
and  that  on  December  13  and  15,  1894,  Long  shipped  a  large  num- 
ber of  boxes  of  oranges  to  the  defendants,  and  made  seven  bills  of 
exchange  upon  the  defendants  payable  to  the  order  of  Long,  for  a 
sum  amounting  to  $1.10  for  each  box  of  oranges  so  shipped,  and  Long 
indorsed  the  drafts  to  the  plaintiff,  which  discounted  the  same,  relying 
upon  the  written  and  verbal  promise  of  the  defendants  to  accept  the 
same,  and  duly  presented  the  same  to  the  defendants  for  acceptance 
and  payment,  but  the  defendants  refused  to  accept  or  to  pay  them. 

Trial  in  the  Superior  Court  without  a  jury,  before  Bond,  J.,  who 
found  for  the  plaintiff,  and  the  defendant  alleged  exceptions. 

[Argument  not  reported.] 

Morton,  J.  The  finding  was  for  the  plaintiff  on  the  ninth  count 
for  the  three  drafts  that  were  drawn  for  oranges  from  the  "  Hard 
Bargain  Grove  "  at  $1.10  per  box,  and  the  exception  is  to  the  refusal 
to  give  the  rulings  requested  so  far  as  they  related  to  that  count.  The 
other  counts  and  the  rulings  relating  to  them  are  immaterial. 

The  ninth  count  was  upon  a  promise  to  accept,  and  alleged  in  sub- 
stance a  promise  in  writing  by  the  defendants  to  Long  to  accept  and 
pay  drafts  drawn  by  him  on  them  equal  to  $1.10  per  box  of  oranges 
shipped,  and  also  a  verbal  promise  to  the  plaintiff  to  accept  and  pay 
such  drafts,  and  that,  relying  on  the  written  and  verbal  promises,  the 
plaintiff  discounted  the  drafts  in  suit  for  Long,  and  upon  presenta- 
tion the  defendants  refused  to  accept  or  pay  them. 

One  question  is  whether  there  was  any  evidence  to  warrant  the 
finding.  The  letters  of  October  8  and  November  30  from  the  defend- 
ants to  Long,  which  were  shown  by  him  to  the  plaintiff's  cashier, 
plainly  imply  authority  on  the  part  of  Long,  if  they  do  not  expressly 
confer  it,  to  draw  on  the  defendants  for  the  fruit  that  he  was  to  ship. 


104  acceptor's  contract. 

There  was  also  evidence  tending  to  show  that  one  of  the  defendants 
told  the  plaintiff's  cashier,  in  substance,  that  Long  was  to  purchase 
and  ship  fruit  for  his  house,  that  he  had  authority  to  draw  on  the 
house  at  Boston,  and  that  his  drafts  would  be  honored;  and  later  in 
the  trial  this  defendant  testified,  amongst  other  things,  "  that  there 
was  an  agreement,  as  to  the  oranges  from  this  grove,  that  Snow  and 
Company  would  advance  $1.10  per  box,  while  Long  should  keep  his 
account  '  margined  up.' "  The  letter  of  November  30  also  spoke  of 
a  draft  at  the  rate  of  $1.10  per  box.  Long  denied  that  anything  was 
said  to  him  about  keeping  his  account  margined  up,  and  further  tes- 
tified "  that  he  drew  many  drafts  on  the  defendants,  .  .  .  which  were 
discoimted  with  the  plaintiff  bank  and  paid  by  Snow  and  Company, 
during  the  months  of  October,  November  and  December,  1894."  We 
think  that  there  was  evidence  warranting  a  finding  that  Long  had 
authority  to  draw  the  drafts  in  question,  and  that  the  plaintiff  dis- 
counted them  on  the  faith  of  assurances  made  to  it  by  the  defendants 
that  drafts  drawn  by  Long  would  be  accepted  and  paid. 

It  is  clear,  that,  in  the  absence  of  any  statute  to  the  contrary,  an 
oral  acceptance  of  an  existing  bill  of  exchange  is  valid  in  this  country, 
and  that  an  indorsee  of  a  bill  so  accepted  may  maintain  an  action  on 
such  acceptance  against  the  acceptor.^  Carnegie  v.  Morrison,  2  ]\Iet. 
381 ;  Exchange  Bank  v.  Eice,  98  Mass.  288 ;  Pierce  v.  Kittredge,  115 
Mass.  374;  Cook  v.  Baldwin,  120  Mass.  317;  Coolidge  v.  Payson, 
2  Wheat.  QQ>;  Townsley  v.  Sumrall,  2  Pet.  170;  Eussell  v.  Wiggin, 
2  Story,  213;  Spaulding  v.  Andrews,  48  Penn.  St.  411;  Bissell  v. 
Lewis,  4  Mich.  450;  Nelson  v.  First  National  Bank,  48  111.  36.  This 
was  formerly  the  law  in  England,  but  it  is  now  otherwise.  It  is  clear 
also  that  for  the  breach  of  an  oral  or  written  promise  to  accept  a  non- 
existing  bill  an  action  will  lie  by  the  holder  of  a  bill  drawn  pursuant 
to  such  promise  and  taken  by  him  on  the  faith  of  it.^  Boyce  v.  Ed- 
wards, 4  Pet.  Ill,  122,  123;  1  Dan.  Neg.  Instr.  §  559;  4  Am.  &  Eng. 
Encyc.  of  Law  (2d  ed.),  238,  239.    See  cases  ubi  supra. 

Wliether  an  oral  promise  to  accept  a  non-existing  bill  constitutes 
a  virtual  acceptance  of  it  when  drawn  is  a  question  on  which  the  cases 
are  not  in  entire  accord,  and  which  we  have  no  occasion  to  consider 
here.  See  Storer  v.  Logan,  9  Mass.  55,  58.  The  ninth  count,  as  has 
been  observed  already,  is  a  count  upon  a  promise  to  accept,  and  not 
upon  an  acceptance.  We  discover  no  error  in  the  refusals  to  rule  as 
requested. 

Exceptions  overruled. 

1  N.  I.  L.  §  149,  requires  the  acceptance  to  be  in  writing. 

'^  But  to  enable  the  plaintiff  to  recover,  the  promise  must  be  made  to  the  plaintiff 
or  his  agent ;  was  such  the  fact  as  to  the  written  promise  in  this  case  1 


PLUMMEK   V.   LYMAN.  105 

PLUMMER   V.    LYMAN". 
Supreme  Court  of  Maiue,  1860.     49  Me.  229. 

But  this  common-law  contract  may  be  unenforceable  because  of  the  Statute  of 
Frauds. 

On  report,  by  Davis,  J. 

Assumpsit  upon  an  order  in  the  following  form : 

"224.  Cumberland,  Dec.  17th,  1857. 

Messrs.  Lyman,  Marrett  &  Co.,  —  Six  months  after  date,  please 
pay  to  Plummer  &  Gerry  two  hundred  and  twenty-four  dollars,  and 
charge  the  same  to  my  account. 

David  Spear.'' 

The  facts  are  stated  in  the  opinion.  The  evidence  was  reported  to 
the  full  court,  who  were  to  draw  such  inferences  as  a  jury  might,  and 
to  enter  a  nonsuit  or  default,  as  the  law  should  require. 

[Argument  reported.]  ! 

Tennet,  C.  J.  The  action  is  upon  an  alleged  verbal  promise, 
made  by  the  defendants,  that  they  would  accept  an  order  to  be  dra^vn 
on  them  by  David  Spear,  in  favor  of  the  plaintiffs ;  and  the  cause  of 
action  alleged,  is  a  failure  to  comply  with  the  promise. 

It  was  admitted  that,  in  the  summer  of  1857,  David  Spear  was 
building  a  vessel  at  Cumberland,  and  all  the  lumber  for  which  the 
order  was  given  by  him  was  furnished  by  the  plaintiffs,  and  put  by 
him  into  the  vessel,  which  was  launched  on  Wednesday,  Dec.  16, 
1857,  about  noon,  and  was  brought  up  to  Portland  the  following  Sat- 
urday evening,  about  eight  or  nine  o'clock.  No  question  is  made  that 
the  plaintiffs  had  a  lien  on  the  vessel  under  the  statute. 

It  appears  from  the  testimony  of  Jesse  Plummer,  one  of  the  plain- 
tiffs, which  is  the  most  favorable  evidence  for  them,  that  the  defend- 
ants, having  made  to  Spear  large  advances  to  aid  him  in  building  the 
vessel,  which  were  equal,  or  nearly  equal  to  the  full  value  of  the 
same,  and  they  having,  as  they  claimed,  the  legal  title  of  the  vessel 
for  the  security  of  the  payment  of  such  advances,  were  unwilling  that 
the  plaintiffs  should  enforce  their  lien  against  the  vessel.  One  of  the 
defendants  being  solicited  on  the  part  of  the  plaintiffs,  to  pay  the 
amount  of  the  claim  of  the  latter  against  Spear,  said,  if  they  would 
obtain  his  order,  as  evidence  of  his  approbation  that  the  payment 
should  be  made,  they  would  accept  it.  Soon  after,  the  witness  ob- 
tained the  order  of  Spear  on  the  defendants,  not  negotiable,  payable 
in  six  months,  for  the  balance  of  their  claim,  payment  of  the  sum  of 
two  hundred  dollars  having  been  made  by  Spear  at  the  time  he  gave 


106  acceptor's  contract. 

the  order,  and  the  plaintiffs  gave  a  receipt  for  the  account.  This 
order  having  been  shown  to  the  defendants  by  the  witness,  and  they 
being  requested  to  accept  it,  refused  to  do  so.  This  was  after  the 
vessel  was  launched,  but  more  than  two  full  days  before  the  lien 
would  expire. 

It  is  regarded  as  well  settled  by  our  law,  that  a  written  promise  to 
accept  a  non-existing  bill  operates  as  an  acceptance,  provided  the  bill 
be  drawn  within  a  reasonable  time;  but  a  verbal  promise  to  accept  a 
non-existing  bill  has  not  been  treated  as  valid.  Coolidge  v.  Payson, 
2  Wheat.  G6;  Weston  v.  Clements,  3  Mass.  1;  Chitty  on  Bills,  312, 
note  (g). 

It  is  insisted  for  the  defendants,  that  the  promise  in  the  case  before 
us,  if  made  as  alleged,  is  within  the  Statute  of  Frauds,  it  being  at 
most  a  verbal  agreement  to  accept  an  order  to  pay  a  debt  of  another. 

The  testimony  does  not  disclose  a  case  of  a  promise  on  the  part  of 
the  defendants  to  accept  an  order  of  Spear  on  them,  as  the  considera- 
tion of  a  discharge  of  the  plaintiffs'  lien  on  the  vessel ;  or  a  promise 
to  discharge  it ;  or  for  giving  to  Spear  a  receipt  by  the  plaintiffs  of 
their  claim;  or  that  they  signified  a  readiness  to  make  the  discharge 
of  the  lien,  at  the  time  they  presented  the  order  to  the  defendants  for 
acceptance,  and  a  demand  on  them  to  accept  it;  or  that  they  in- 
formed them  that  they  had  given  to  Spear  a  receipt  of  their  claim. 
But  the  cause  relied  upon  in  support  of  the  action  is  a  naked  promise, 
that  the  order  of  Spear  would  be  accepted. 

The  acceptance  by  the  defendants  of  such  an  order  of  Spear  on 
them  as  would  discharge  {he  account  against  him,  would,  by  operation 
of  law,  discharge  the  lien;  but  this  would  not  be  the  consideration 
of  the  previous  verbal  promise  of  the  defendants  to  accept  an  order, 
not  then  drawn,  and  which  might  never  be  drawn,  to  pay  the  debt 
of  Spear,  when  such  discharge  of  the  account  was  not  a  condition 
to  the  acceptance  of  the  order. 

The  case  differs  from  that  of  Townsley  v.  Sumrall,  2  Pet.  170, 
relied  upon  by  the  plaintiffs,  which  was  a  promise  to  accept  bills  and 
not  performed,  goods  having  been  previously  received  by  the  defend- 
ant to  the  amount  of  the  bills  promised  to  be  accepted  when  they 
should  be  drawn.  This  was  held  to  be  a  promise,  not  to  pay  the  debt 
of  another,  but  the  debt  of  the  defendant  himself,  —  damage  to  the 
promisee  furnishing  as  good  a  consideration  as  a  benefit  to  the 
promisor. 

It  is  not  easy  to  perceive  that  the  refusal  to  accept  the  order  by  the 
defendants  was  injurious  to  the  plaintiffs.  The  receipt  to  Spear  was 
valid  only  so  far  as  the  plaintiffs  received  actual  payment.  The 
order,  not  being  accepted  and  not  negotiable,  was  no  discharge  of  that 
part  of  the  account  to  which  it  was  intended  to  apply,  as  between  the 
plaintiffs  and  Spear.  The  receipt  could  be  explained,  and  the  plain- 
tiffs could  not  be  injuriously  affected  thereby.   The  defendants  refused 


HOUGH   V.   LORING.  107 

to  accept  the  order  as  they  had  promised.  They  had  no  knowledge 
of  the  receipt  when  they  refused  to  accept  the  order.  They  were 
not  misled  by  the  receipt,  and  had  no  reason  to  suppose  that  the  lien 
was  discharged;  and  they  certainly  could  not  claim  an  advantage 
from  the  receipt,  as  being  a  discharge  of  the  lien,  more  than  could 
Spear,  as  being  the  discharge  of  the  balance  of  his  debt.  The  plain- 
tiffs did  not  treat  the  receipt  as  a  discharge  of  the  debt,  or  of  the  lien 
on  the  vessel,  inasmuch  as,  after  the  defendants'  refusal  to  accept  the 
order,  they  took  out  a  process  in  order  to  enforce  the  lien  by  attach- 
ment, and  were  prevented  from  doing  it  by  their  own  delay. 

The  promise  of  the  defendants,  relied  upon,  appertained  to  the  debt 
of  another,  and  not  to  their  own,  and  is  not  a  foundation  in  law  for 
the  action. 

Plaintiff  nonsuit. 

Appleton,  Cutting,  Goodenow,  Davis,  and  Kent,  JJ.,  con- 
curred. 


HOUGH   V.   LOEING. 

Supreme  Court  of  Massachusetts,  April,  1834.    24  Pick.  254. 

Virtual  acceptance  is,  second,  by  conduct  on  the  part  of  the  drawee,  under  such 
circumstances  as  to  give  credit  to  the  bill. 

Assumpsit  on  an  order  or  draft  for  the  sum  of  $50,  dated  New 
York,  April  3,  1834,  drawn  by  Eliza  Woolcutt,  on  the  defendant, 
in  favor  of  the  plaintiff. 

At  the  trial  in  the  Court  of  Common  Pleas,  before  Strong,  J.,  it 
was  proved  by  the  deposition  of  W.  W.  Morse,  that  the  draft  was  sent 
to  Boston  to  be  collected,  while  the  defendant  was  absent  on  a  Journey 
to  New  York;  that  the  witness,  who  said  he  was  the  agent  of  the 
plaintiff,  informed  the  defendant  in  New  York,  that  the  draft  had 
been  made  and  sent  to  Massachusetts,  and  produced  to  the  defendant 
a  discharge  from  the  draft  and  requested  him  to  pay  it;  that  the 
defendant  looked  at  the  discharge  and  replied,  that  "  he  would  rather 
pay  it  in  the  regular  way,  when  presented,"  and  that  "  he  would 
meet  it  at  the  Concord  Bank,  or  pay  to  any  person  who  should  pre- 
sent it";  that  the  defendant  returned  home,  and  soon  afterwards 
the  draft  was  sent  back  from  Massachusetts;  that  the  plaintiff  then 
gave  the  draft  to  the  witness  with  his  name  indorsed  thereon,  and 
requested  him  to  inclose  it  to  the  defendant  and  to  ask  him  to  send 
a  fifty-dollar  bill  by  mail ;  that  the  witness  did  so,  by  a  letter  dated 
April  15th,  1834,  but  received  no  answer;  and  that  he  afterwards 
wrote  to  the  defendant  again  and  again  on  the  subject  without  receiv- 
ing any  reply. 

By  the  deposition  of  Henry  Hutchinson  it  appeared  that  the  de- 


108  acceptor's  contract. 

ponent  received  at  New  York  a  letter  from  the  defendant,  dated  May 
26,  1834,  in  which  was  the  following  clause :  "  I  received  an  order 
from  Mr.  Morse  drawn  by  Eliza  for  fifty  dollars,  which  will  be  dis- 
posed of  some  way  or  other  when  I  am  there." 

The  judge  ruled  that  this  evidence  proved  a  conditional  acceptance 
of  the  order  by  the  defendant,  but  that  it  did  not  appear  from  the 
evidence  that  the  condition  had  been  complied  with  by  the  plaintiff; 
and  he  instructed  the  jury  that  if  they  believed  the  witnesses,  they 
must  find  for  the  defendant. 

The  jury  returned  a  verdict  for  the  defendant. 

The  plaintiff  excepted  to  the  instruction,  that  it  did  not  appear 
from  the  testimony  that  the  condition  on  wliich  the  order  was  ac- 
cepted, had  been  complied  with. 

[Argument  not  reported.] 

Putnam,  J.  Taking  it  to  be  true  that  this  was  originally  a  con- 
ditional acceptance,  and  that  the  condition  was  not  performed,  yet 
there  are  other  facts  proved  in  the  case,  upon  which  the  jury  might 
have  found  a  verdict  for  the  plaintiff.  If  the  condition  were  waived 
and  an  absolute  acceptance  were  made  after  the  conditional  one,  it  is 
very  clear  that  the  subsequent  absolute  acceptance  should  bind  the 
defendant  to  pay  the  bill. 

The  defendant  originally  refused  to  accept  a  discharge  of  the  bill, 
which  was  executed  by  the  plaintiff;  but  said  "  he  would  rather  pay  it 
in  the  regiilar  way  when  presented,"  and  that  "  he  would  meet  it  at 
the  Concord  Bank,  or  pay  to  any  person  who  should  present  it."  He 
did  not  mean  to  trust  to  the  discharge  which  was  produced;  but  he 
meant  to  take  up  the  draft,  to  have  the  draft  in  his  own  possession 
before  he  paid  it. 

Well,  the  plaintiff  afterwards  sent  the  draft,  indorsed  by  him,  on 
the  15th  of  April,  1834,  in  a  letter  addressed  to  the  defendant,  which 
the  defendant  received.  Upon  the  receipt  of  that  letter  and  draft,  the 
defendant  might  have  insisted,  if  he  had  pleased,  upon  the  perform- 
ance of  the  strict  terms  of  the  condition,  viz.,  that  some  person  should 
come  and  present  it  and  give  it  up,  upon  pajonent ;  or  he  might  con- 
sider the  sending  the  -draft  with  a  blank  indorsement,  as  a  presenta- 
tion; and  having  the  draft  itself  so  indorsed,  he  might  intend  to 
accept  and  pay  it.  If  he  intended  to  insist  upon  the  original  terms, 
he  was  bound  to  answer  the  letter  of  the  15th  of  April,  in  a  reasonable 
time,  to  the  end  that  the  plaintiff,  the  holder  of  the  bill,  might  take 
his  further  remedy,  by  complying  literally  with  the  condition  origi- 
nally proposed.  He  was  requested  to  send  the  fifty-dollar  bill  by  the 
mail,  in  payment.  He  might  have  answered  that  he  would  do  no  such 
thing,  but  that  if  the  holder  would  authorize  any  person  to  come 
to  him  and  receive  the  money,  he  would  pay  it,  and  in  the  mean  time 
hold  the  draft  for  the  use  of  the  holder.    But  he  did  not  take  such  a 


HOUGH   V.   LORING.  109 

course.  On  the  contrary,  he  kept  the  bill,  and  the  money  also,  and 
refused  to  answer  the  repeated  letters  of  the  agent  of  the  plaintiff 
upon  the  subject.  He  has  retained  the  draft  and  the  money  ever 
since.  But  on  the  26th  of  May,  1834,  he  acknowledged  by  his  letter 
that  he  had  received  the  order  drawn  by  Eliza  (the  drawer)  for  $50, 
"which  will  be  disposed  of  some  way  or  other  when  I  am  there." 
Now  he  makes  no  objection  as  to  the  want  of  a  due  and  regular  pres- 
entation or  acceptance  of  the  draft,  but,  on  the  contrar}^,  agrees  to 
make  some  disposition,  which  may  fairly  mean  to  pay  the  same  when 
he  should  be  at  New  York.  Now  if  there  was  a  waiver  of  the  original 
condition,  and  such  consent  afterwards  as  amounted  to  a  presentation 
and  acceptance,  it  renders  the  acceptor  liable;  and  it  is  not  for  him 
afterwards  to  postpone  the  payment,  or  make  any  terms  when  and 
where  he  will  pay.  He  became  liable  to  pay  as  upon  an  absolute 
acceptance.  Thus,  in  Chitty  on  Bills  (Story's  ed.  147),  it  is  stated, 
that  an  acceptance  may  be  implied  as  well  as  express.  It  may  be  im- 
plied and  inferred  from  the  drawee's  keeping  the  bill  a  great  length 
of  time,  or  by  any  other  act  which  gives  credit  to  the  bill,  and  induces 
the  holder  not  to  protest  it,  and  induces  him  to  consider  it  as  ac- 
cepted. Clavey  v.  Dolbin,  Cas.  temp.  Hardw.  278 ;  Harvey  v.  Martin, 
1  Campb.  425. 

Now  here  the  holder  had  no  reason  to  suppose,  that  the  bill  was  not 
accepted,  as  it  was  retained  by  the  defendant  in  the  manner  stated. 
"We  all  think,  that  the  facts,  whether  the  defendant  waived  the  condi- 
tion originally  made,  and  whether  he  did  not  so  conduct  himself 
afterwards,  as  should  by  implication  bind  him  as  an  absolute  acceptor 
of  the  draft,  were  proper  to  be  left  to  the  jury.  The  jury  might  well 
infer  an  absolute  acceptance,  from  the  facts  disclosed  in  this  report, 
if  not  contradicted  or  explained  by  other  evidence.  If  there  were 
such  an  implied  acceptance  it  could  not  be  recalled.  Thornton  v. 
Dick,  4  Esp.  E.  272. 

We  are  all  of  opinion  that  the  verdict  should  be  set  aside  and  a  new 
trial  be  had  at  the  bar  of  this  court. 

Note.  —  Acceptance  by  conduct  is  here  classified  with  acceptance  on 
separate  paper  and  promises  to  accept,  under  the  term  virtual  acceptance, 
because  all  three  stand  substantially  upon  the  same  footing:  the  liability  of 
the  drawee  in  any  case  turns  upon  the  question  whether  by  word  or  act  he  has 
given  credit  to  the  bill,  and  there  has  been  a  change  of  position  on  the  part 
of  the  holder  in  reliance  thereon.  In  this  respect  they  all  differ  from  accept- 
ance proper,  which  is  binding  as  well  in  favor  of  those  already  parties  to  the 
bill,  as  in  favor  of  tliose  who  purchase  in  reliance  on  the  acceptance.  "  It  is 
immaterial  when  an  acceptance  [proper]  is  made;  it  may  be  made  at  any 
time,  and  the  rights  of  the  payee  and  of  indorsees  are  the  same  after  it  is 
made,  whether  they  were  acquired  in  anticipation  of  it  or  subsequent  to  it." 
Arpin  v.  Owens,  140  Mass.  144,  145.     Cf.  N.  I.  L.  §§  151,  152. 

The  holder  may  in  any  case  insist  upon  acceptance  proper,  and  if  this  is 
refused,  may  treat  the  bill  as  dishonoi-ed.     N.  I.  L.  §  150. 


110  ACCEPTOU'S   CONTRACT. 

DUNAVAN^   V.    FLYNN. 
Supreme  Court  of  Massachusetts,  October,  1875.     118  Mass.  537. 
But  mere  detention  of  the  bill  is  not  such  conduct.^ 

Contract  to  recover  $9  on  an  account  annexed  for  work  and  labor. 
The  answer  of  the  defendant  contained  a  general  denial  and  alleged 
payment.  Trial  in  the  Central  District  Court  of  Worcester,  the 
judge  of  which  allowed  a  bill  of  exceptions  in  substance  as  follows : 

At  the  trial,  the  defendant  offered  the  following  order,  signed  by 
the  plaintiff,  drawn  on  the  defendant,  and  payable  to  bearer,  and 
dated  Worcester,  June  27 :  "  Please  to  pay  the  bearer  9  dollars  due 
to  me  for  work;  this  woman  is  my  boarding  boss  and  oblige  yours," 
&c.  Below  were  written  the  words,  "  Acted  June  30th,  1874,"  over 
the  defendant's  signature.  It  appeared  in  evidence,  and  was  not 
contradicted,  that  the  bearer  of  the  order  was  Mrs.  Cronan ;  that  the 
order  was  delivered  to  her  by  the  plaintiff;  that  upon  the  receipt  of 
the  order,  Mrs.  Cronan  presented  it  to  the  defendant  and  left  the 
order  in  the  defendant's  possession ;  that  the  defendant  said  thot  he 
could  not  pay  it  then,  but  that  if  she  could  give  him  three  or  four 
days  he  would  pay  it;  that  she  gave  the  defendant  the  three  or  four 
days,  and  the  order  was  left  in  the  defendant's  possession,  and  there 
remains,  and  she  never  called  upon  the  defendant  for  payment  after- 
wards. The  defendant  testified  substantially  the  same,  and,  upon 
cross-examination,  testified  that  after  the  departure  of  Mrs.  Cronan 
he  wrote  the  words,  "  Acted  June  30th,  1874,  J.  W.  Flynn,"  upon  the 
face  of  the  order;  that  he  wrote  that  to  make  him  pay  it  to  Mrs. 
Cronan ;  that  he  intended  the  words  written  on  the  face  of  the  order 
for  an  acceptance  in  writing.  On  cross-examination,  the  defendant, 
in  answer  to  the  plaintiff's  counsel,  said  that  he  did  not  think  his 
liability  to  pay  the  order  commenced  until  after  he  had  written  his 
name  on  the  order. 

The  judge,  against  the  objection  of  the  defendant,  instructed  the 
jury :  "  If  the  defendant  did  not  verbally,  or  in  writing,  accept  the 
order  when  presented,  but,  the  order  being  left  with  him,  he  after- 
wards wrote  the  acceptance  upon  it,  but  did  not  after  such  acceptance 
inform  either  the  drawer  or  Mrs.  Cronan  of  the  fact,  but  retained 
the  order  in  his  custody,  this  would  not  operate  as  pa3mient  of  the 
plaintiff's  claim  against  him." 

The  jury  returned  a  verdict  for  the  plaintiff;  and  the  defendant 
alleged  exceptions. 

In  the  Superior  Court  the  instructions  were  affirmed,  and  the  de- 
fendant entered  the  exceptions  in  this  court. 

[Argument  not  reported.] 

»  N.  I.  L.  §  154. 


JARVIS   V.   WILSON.  Ill 

Gray,  C.  J.  An  acceptance  of  a  bill  of  exchange,  or  draft  for  the 
pa3'ment  of  money,  may  be  oral,  or  may  be  implied  from  acts,  such 
as  detention  for  a  long  time,  contrary  to  the  usage  of  the  parties  and 
under  such  circumstances  as  to  give  credit  to  the  bill.^  Storer  v. 
Logan,  9  Mass.  55,  60;  Pierce  v.  Kittredge,  115  Mass.  374;  Hough 
V.  Loring,  24  Pick.  254,  257;   3  Kent  Com.  (12th  ed.)  85. 

But  in  the  case  before  us,  the  jury  have  found  that  there  was  no 
oral  acceptance,  and  were  warranted  in  so  doing,  for  although  the 
testimony  of  the  defendant  and  of  the  holder  of  the  bill,  tending 
to  prove  such  acceptance,  is  stated  in  the  bill  of  exceptions  not  to 
have  been  contradicted,  the  jury  were  not  obliged  to  believe  it. 
Allowing  the  utmost  weight  to  all  the  evidence,  there  was  nothing 
to  show  that  the  detention  of  the  bill  by  the  defendant  was  contrary 
to  the  usual  course  of  dealing  between  the  parties  (for  it  did  not 
appear  that  they  had  had  any  other  dealings),  or  that  the  defendant 
was  under  any  obligation  to  return  the  bill  to  the  holder,  or  detained 
it  for  any  other  reason  except  that  she  did  not  call  for  it.  Under 
these  circumstances,  it  was  rightly  held  that  the  mere  writing  of 
the  acceptance  upon  the  bill,  not  communicated  to  the  drawer  or 
holder,  and  the  detention  of  the  bill  in  the  defendant's  custody,  did 
not  bind  him,  or  operate  as  a  payment  of  his  debt  to  the  drawer. 
Clavey  v.  Dolbin,  Cas.  temp.  Hardw.  278;  Jeune  v.  Ward,  2  Stark. 
326;  s.  c.  1  B.  &  Aid.  653;  Mason  v.  Barff,  2  B.  &  Aid.  26;  Cox  v. 
Troy,  5  B.  &  Aid.  474;  s.  c.  1  Dowl.  &  Eyl.  38;  Overman  v. 
Hoboken  City  Bank,  1  Vroom,  61,  and  2  Vroom,  563. 

Exceptions  overruled. 

JARVIS  V.  WILSOK 

Supreme  Court  of  Connecticut,  May,  1878.     46  Conn.  91. 

The  acceptor  admits  funds  of  the  drawer  in  his  hands,  and  agrees  to  pay  the  bill 
according  to  the  tenor  of  his  acceptance.^ 

Assumpsit  by  the  payee  against  the  acceptor  of  a  bill  of  exchange. 
Verdict  for  the  plaintiff,  and  motion  in  error  by  the  defendants.  The 
facts  are  stated  in  the  opinion. 

[Argument  not  reported.] 

1  This,  it  is  believed,  is  the  true  theory  of  acceptance  by  conduct.  Chitty,  76,  77  ; 
Hon!?h  V.  Loring,  24  Pick.  254,  ante,  p.  107  ;  Jeune  v.  Ward,  2  Stark.  326,  331,  opinion 
of  Mr.  Justice  Bayley.  Cf.  N.  I.  L.  §  154,  providing  that  if  the  drawee  destroys  the  l>ill 
or  refuses  within  twenty-four  hours  to  return  the  bill  to  the  holder,  he  will  Ite  deemed 
to  have  accepted  it.  It  has  been  held  in  New  York  under  a  statute,  in  the  words  of  this 
section,  that  to  recover,  the  holder  must  prove  a  conversion  of  the  bill.  Matti.'son  v. 
Moulton,  11  Hun,  268  ;  s.  c.  79  N.  Y.  627.  It  is  clear  that  a  mere  retention  of  the 
bill  is  not  enough,  since  the  holder  cannot  impose  a  duty  on  the  drawee  to  return  the 
bill,  apart  from  custom  or  agreement;  but  to  require  the  act  to  be  wrong<"ul,  in 
the  sense  of  a  conversion,  goes  to  the  other  extreme. 

^  N.  I.  L.  §  79.  Cf.  Irving  Bank  v.  Wetherald,  36  N.  Y.  335,  post,  p.  n4,  as  to 
the  effect  of  certification  of  a  cheque,  in  mistake  as  to  funds. 


112  acceptor's  contract. 

LooMis,  J,  On  the  8th  of  July,  1874,  one  William  Murphy  owed 
the  plaintiff  $189.20,  and  drew  his  order  on  the  defendant  in  favor 
of  the  plaintiff  in  writing  as  follows: 

"  Mr.  A.  M.  Wilson.  Please  pay  Joseph  Jarvis  one  hundred  and 
eighty-nine  dollars  and  twenty  cents,  and  charge  the  same  to  me. 

William  Murphy." 

Murphy,  who  was  then  and  had  been  for  some  time  in  the  employ 
of  the  defendant,  had  been  authorized  by  the  latter  to  draw  orders 
in  favor  of  his  workmen,  of  whom  the  defendant  knew  the  plaintiff 
to  be  one. 

The  above  order  was  duly  presented  for  acceptance  to  the  defendant 
on  the  same  day  that  it  was  given,  and  the  defendant  said  it  was 
good,  and  verbally  promised  to  pay  it.  It  afterwards  appeared  that 
there  was  in  fact  due  from  the  defendant  to  the  drawer  only  $144.94, 
and  thereupon  the  defendant  refused  to  pay  the  plaintiff  as  he  had 
before  agreed.  The  court  below  upon  these  facts  held  the  defendant 
liable  for  the  full  anioimt  of  the  order.  We  think  the  judgment  must 
stand  against  all  the  objections  urged  in  behalf  of  the  defendant. 

The  defendant  claims,  iji  Umine,  that  his  undertaking  cannot  be 
regarded  as  subject  to  the  rules  applicable  to  bills  of  exchange,  but 
must  be  treated  as  a  mere  promise  to  pay  money.  But  we  do  not 
see  why  it  does  not  contain  every  essential  element  of  the  most 
approved  definition  of  a  bill  of  exchange.  It  is  a  written  order  from 
Murphy,  addressed  to  the  defendant,  requesting  him  to  pay  the 
plaintiff  a  certain  sum  of  money  therein  named.  1  Bouvier's  Law 
Diet.,  Bill  of  Exchange;  Byles  on  Bills,  57;  Story  on  Bills,  §§3, 
37,  40;  Edwards  on  Bills  and  Notes,  150;  Eastern  E.  E.  Co.  v. 
Benedict,  15  Gray,  292;  Kendall  v.  Galvin,  15  Maine,  131;  Michi- 
gan Ins.  Co  V.  Leavenworth,  30  Verm.  12. 

But  conceding  the  order  to  be  a  bill  of  exchange,  the  defendant 
further  claims  that  he  is  not  liable,  because  his  acceptance  was  only 
by  parol,  when  it  should  have  been  in  writing. 

It  is  true,  as  a  general  rule,  that  to  make  one  liable  as  a  party  to 
a  bill  or  note  his  name  should  appear  thereon  under  his  own  hand 
or  that  of  his  agent.  A  wise  policy  may  also  require  that  the  liability 
of  an  acceptor  should  not  depend  on  parol  evidence,  and,  recognizing 
this,  some  states  have  already  changed  the  rule  of  the  common  law 
as  to  an  acceptor  of  a  bill  of  exchange.  In  New  York  it  is  required 
by  statute  that  the  acceptance  should  be  in  writing,  and  there  is  a 
similar  statute  in  England  as  applicable  to  an  inland  bill.  But  where 
there  is  no  statute  to  control,  the  rule  is  quite  general,  both  in 
England  and  in  the  United  States,  that  an  acceptance  of  a  bill  of 
exchange  may  be  by  parol.  1  Swift  Dig.  424 ;  Story  on  Bills,  §  §  242, 
243,  246;    1  Parsons  on  Cont.  267;   Edwards  on  Bills  and  Notes, 


PRICE   V.   NEAL.  113 

409;  Dunavan  v.  'Flyrm,  118  Mass.  539;  Spaulding  v.  Andrews,  48 
Penn.  St.  E.  411. 

The  Statute  of  Frauds  does  not  apply  to  such  an  undertaking. 
One  reason  may  be  that  the  acceptor  is  regarded  as  the  primary 
debtor,  and  his  acceptance  is  an  undertaking  not  merely  to  pay  a 
debt  due  from  the  drawer  to  the  payee,  but  to  pay  his  own  debt  to 
the  drawer. 

But  in  this  case  the  defendant  relies  on  the  fact  that  when  he 
accepted  the  bill  he  had  not  in  his  hands  sufficient  funds  of  the 
drawer  to  pay  the  amount  required,  and  contends  that  the  acceptance 
should  therefore  either  be  considered  within  the  statute,  or  should  be 
held  void  for  want  of  consideration.  This  objection  ignores  the  fun- 
damental principle  that  the  acceptance  admits  everything  essential 
to  the  validity  of  the  bill,  and  that  want  or  failure  of  consideration 
cannot  be  shown  in  a  suit  by  the  payee  against  the  acceptor.  The 
presumption  is  that  every  bill  of  exchange  is  drawn  on  account  of 
some  indebtedness  from  the  drawee  to  the  drawer,  and  that  the  accept- 
ance is  an  appropriation  of  the  funds  of  the  latter  in  the  hands  of  the 
former.  The  rule  of  law  is  not  unjust  that  prevents  the  acceptor 
from  showing  as  a  defence  against  a  suit  by  the  payee  a  want  of  funds 
of  the  drawer  in  his  hands,  for  it  was  his  duty  to  ascertain  before  he 
accepted  the  bill  whether  he  owed  the  drawer  that  amount.  This  was 
exclusively  within  his  knowledge,  but  the  plaintiff  had  no  means  of 
knowing  how  the  fact  was,  and  he  had  a  right  to  assume  that  the 
defendant  would  not  accept  the  bill  unless  he  had  funds  of  the  drawer 
sufficient  to  make  good  the  acceptance.  Fisher  v.  Beckwith,  19  Vt. 
31 ;  Arnold  v.  Sprague,  34  Vt.  402 ;  United  States  v.  Bank  of  Me- 
tropolis, 15  Pet.  377 ;  Grant  v.  Elliott,  7  Wend.  227 ;  Hoffman  v. 
Bank  of  Milwaukee,  12  Wall.  181 ;  Parsons  on  Notes  and  Bills,  323; 
1  Daniel  on  Negotiable  Instruments,  135. 

There  is  no  error  in  the  judgment  complained  of. 

In  this  opinion  the  other  judges  concurred. 


PRICE   V.    NEAL. 

King's  Bench  of  England,  Michaelmas,  1762.    3  Burr.  1354. 

The  acceptor  further  admits,  conclusively,  that  the  signature  of  the  drawer  is  gen- 
tune  ;  and  this  admission  is  available  in  favor  of  any  bona  Jide  holder.^ 

This  was  a  special  case  reserved  at  sittings  before  Lord  Mans- 
field. It  was  an  action  upon  the  case  brought  by  Price  against  Neal, 
wherein  Price  declares  that  the  defendant  Neal  was  indebted  to  him 
m  £80  for  money  had  and  received  to  his  the  plaintiff's  use ;  and  dam- 

1  N.  I.  L.  §  79. 

8 


114  acceptor's  contract. 

ages  were  laid  at  £100.  The  general  issue  was  pleaded,  and  issue 
joined  thereon. 

It  was  proved  at  the  trial  that  a  bill  was  drawn  as  follows :  "  Leices- 
ter, 22  November,  1760.  Sir,  six  weeks  after  date  pay  Mr,  Eogers 
Kuding  or  order  forty  pounds,  value  received  for  Mr.  Thomas  Plough- 
for;  as  advised  by.  Sir,  your  humble  servant,  Benjamin  Sutton.  To 
Mr.  John  Price  in  Bush-lane,  Cannon-street,  London."  Indorsed, 
"  R.  Ending,  Antony  Topham,  Hammond  &  Laroche.  Received  the 
contents,  James  Watson  &  Son :  Witness  Edward  Neal ;  " 

That  this  bill  was  indorsed  to  the  defendant  for  a  valuable  consid- 
eration, and  notice  of  the  bill  left  at  the  plaintiff's  house  on  the  day 
it  became  due.  Whereupon  the  plaintiff  sent  his  servant  to  call  on 
the  defendant,  to  pay  him  the  said  sum  of  £40  and  take  up  the  said 
bill,  which  was  done  accordingly ; 

That  another  bill  was  drawn  as  follows :  "  Leicester,  1st  February, 
1761.  Sir,  six  weeks  after  date  pay  Mr.  Rogers  Ruding  or  order  forty 
pounds,  value  received  for  Mr.  Thomas  Ploughfor,  as  advised  by,  Sir, 
j'our  humble  servant,  Benjamin  Sutton.  To  ]\Ir.  John  Price  in  Bush- 
lane,  Cannon-street,  London ; "  that  this  bill  was  indorsed,  "  R. 
Ruding,  Thomas  Watson  &  Son.  Witness  for  Smith,  Right  &  Co."; 
that  the  plaintiff  accepted  this  bill  by  writing  on  it,  "  accepted,  John 
Price  " ;  and  that  the  plaintiff  wrote  on  the  back  of  it,  "  Messieurs 
Freame  &  Barclay,  pray  pay  forty  pounds  for  Jolin  Price." 

That  this  bill,  being  so  accepted,  was  indorsed  to  the  defendant  for 
a  valuable  consideration,  and  left  at  his  banl^ers  for  payment,  and  was 
paid  by  order  of  the  plaintiff  and  taken  up. 

Both  these  bills  were  forged  by  one  Lee,  who  has  been  since  hanged 
for  forgery.  The  defendant  Neal  acted  innocently  and  hona  fide, 
without  the  least  privity  or  suspicion  of  the  said  forgeries  or  of  either 
of  them,  and  paid  the  whole  value  of  those  bills. 

The  jury  found  a  verdict  for  the  plaintiff,  and  assessed  damages 
£80  and  costs  40s.,  subject  to  the  opinion  of  the  court  upon  this  ques- 
tion :  "  Whether  the  plaintiff,  under  the  circumstances  of  this  case, 
can  recover  back  from  defendant  the  money  he  paid  on  said  bills  or 
either  of  them." 

Lord  Mansfield  stopped  Mr.  Yates  for  the  defendant,  saying  that 
this  was  one  of  those  cases  that  could  never  be  made  plainer  by 
argument. 

It  is  an  action  upon  the  case,  for  money  had  and  received  to  the 
plaintiff's  use ;  in  which  action  the  plaintiff  cannot  recover  the  money 
unless  it  be  against  conscience  in  the  defendant  to  retain  it,  and  great 
liberality  is  always  allowed  in  this  sort  of  action.  But  it  can  never 
be  thought  unconscientious  in  the  defendant  to  retain  this  money, 
when  he  has  once  received  it  upon  a  bill  of  exchange  indorsed  to  him 
for  a  fair  and  valuable  consideration,  which  he  had  hona  fide  paid 
without  the  least  privity  or  suspicion  of  any  forgery. 


DEDHAM  NATIONAL  BANK  V.   EVERETT  NATIONAL  BANK.   115 

Here  was  no  fraud,  no  wrong.  It  was  incumbent  upon  the  plain- 
tiff to  be  satisfied  that  tlie  bill  drawn  upon  him  was  the  drawer's  hand 
before  he  accepted  or  paid  it;  but  it  was  not  incumbent  upon  the  de- 
fendant to  inquire  into  it.  Here  was  notice  given  by  the  defendant  to 
the  plaintiff  of  a  bill  drawn  upon  him ;  and  he  sends  his  servant  to 
pay  it  and  take  it  up.  The  other  bill  he  actually  accepts,  after  which 
acceptance  the  defendant  innocently  and  bona  fide  discounts  it.  The 
plaintiff  lies  by  for  a  considerable  time  after  he  has  paid  these  bills, 
and  then  finds  out  that  they  were  forged ;  and  the  forger  comes  to  be 
hanged.  He  made  no  objection  to  them  at  the  time  of  paying  them. 
Whatever  neglect  there  was,  was  on  his  side.  The  defendant  had 
actual  encouragement  from  the  plaintiff  himself  for  negotiating  the 
second  bill,  from  the  plaintiff's  having  without  any  scruple  or  hesita- 
tion paid  the  first;  and  he  paid  the  whole  value,  bona  fide.  It  is  a 
misfortune  which  has  happened  without  the  defendant's  fault  or 
neglect.  If  there  was  no  neglect  in  the  plaintiff,  yet  there  is  no 
reason  to  throw  off  the  loss  from  one  innocent  man  upon  another 
innocent  man ;  but  in  this  case,  if  there  was  any  fault  or  negligence 
in  any  one,  it  certainly  was  in  the  plaintiff  and  not  in  the  defendant. 

Per  Cur.    Eule  —  That  the  postea  be  delivered  to  the  defendant. 


DEDHAM  NATIONAL  BANK  v.    EVEEETT  NATIONAL 

BANK. 

Supreme  Court  of  Massachusetts,  January,  1901.     177  Mass.  392;  59  N.  E. 

Rep.  62. 

Who  has  not  contributed  to  the  deception  of  the  drawee. 

Contract,  by  a  bank  to  recover  money  paid  to  the  defendant  bank 
on  two  forged  cheques  drawn  on  the  plaintiff.  "Writ  dated  October  27, 
1898. 

The  trial  in  the  Superior  Court  was  before  Braley,  J.,  who  re- 
ported the  case  for  the  consideration  of  this  court. 

By  the  report  it  appeared  that  the  cheques  paid  by  the  plaintiff  were 
both  drawn  upon  the  Dedham  National  Bank  of  Dedham,  were  made 
payable  "  to  the  order  of  cash,"  and  were  signed  "  W.  J.  Glancy." 
Beneath  each  were  the  words  "  Payable  through  Boston  Clearing 
House."  The  first,  dated  July  30,  1897,  was  for  $150,  and  the 
second,  dated  September  3,  1897,  was  for  $200. 

It  was  in  evidence  that  Glancy  had  been  a  depositor  in  the  plaintiff 
bank  about  ten  years ;  that  Glancy's  account  was  practically  a  "  sleep- 
ing deposit " ;  that  he  was  not  in  the  habit  of  drawing  cheques  upon 
it;  that  these  were  the  only  two  cheques  purporting  to  be  drawn  by 
him  during  that  year.    There  was  also  evidence  that  country  depos- 


116  acceptor's  contract. 

itors  seldom  send  in  their  books  to  be  balanced,  and  that  Glancy  had 
not  presented  his  book  between  July  and  January. 

The  two  cheques  were  presented  to  the  defendant  bank  by  one 
Kitchens,  clerk  of  one  Fenno.  Fenno  was  then,  and  had  been  for 
many  years,  one  of  the  depositors  of  the  defendant.  Ilitchens  repre- 
sented Fenno  at  the  bank  three  or  four  times  a  week. 

At  the  request  of  Hitchens,  $50  of  the  first  cheque  was  paid  to  him, 
which  he  stated  was  for  Fenno,  and  $100  was  credited  to  Fenno's 
account  with  the  bank.  On  the  second  cheque,  upon  a  similar  request, 
the  defendant  paid  over  its  counter  to  Hitchens  the  sum  of  $100, 
which  the  teller  supposed  was  for  the  benefit  of  Fenno,  and  credited 
the  account  of  H.  L.  Fenno  with  the  sum  of  $100.  The  defendant's 
teller  testified  that  during  the  time  Hitchens  made  deposits  for 
Fenno,  cheques  were  paid  in  cash  in  whole  or  in  part  for  Fenno. 

The  defendant  indorsed  both  cheques  as  follows : 

"  Pay  only  through  Clearing  House  to  the  Everett  National  Bank 
of  Boston.  J.  T.  Eager,  Cashier." 

On  August  2  and  September  7,  1897,  respectiveh^  the  two  cheques 
were,  through  the  clearing-house,  paid  in  behalf  of  the  plaintiff  by 
one  Arthur  M.  Daniels,  an  employee  of  the  plaintiff,  and  charged  by 
him  to  Clancy's  account.  The  judge  found  that  the  alleged  signature, 
'*'  W.  J.  Glancy,"  appearing  upon  both  cheques,  was  forged  by  Hitch- 
ens. He  also  found  as  follows :  "  At  the  time  when  these  cheques  were 
cashed,  W.  J.  Clancy's  signature  was  on  file  with  said  bank,  and  I 
find  that  if  said  Arthur  M.  Daniels  had  compared  the  alleged  signa- 
ture of  the  cheques  with  the  genuine  signature  of  W.  J.  Glancy  he 
would  have  discovered  the  forgery." 

On  February  25,  1898,  the  plaintiff  wrote  to  the  defendant  that  the 
cheques  had  been  discovered  to  be  forgeries  and  requested  repa^'-ment. 

The  judge  further  found  that,  at  the  time  Hitchens  presented  both 
cheques  to  the  defendant  bank,  that  bank  "  did  not  inquire  as  to  the 
genuineness  of  the  signature  of  "W.  J.  Glancy,  nor  require  the  in- 
dorsement of  the  cheque  by  the  person  presenting  it  for  pa3Tnent,  or 
of  the  depositor  to  whose  account  the  cheque  was  to  be  credited."  He 
also  found  as  follows :  "  The  evidence  was  conflicting  as  to  a  custom 
that  when  a  cheque,  in  the  form  in  which  these  cheques  were  drawn, 
was  presented  for  payment  under  the  circumstances  disclosed  in  this 
case,  it  was  the  duty  of  the  bank  to  require  the  identification  of  the 
person  to  whom  it  was  paid,  if  unknown  to  the  bank,  and  his  indorse- 
ment if  not  a  depositor,  or  the  indorsement  of  the  depositor  for  whose 
account  it  was  deposited.  I  am  not  satisfied  that  any  such  custom 
exists,  the  usage  varying  with  different  banks." 

The  plaintiff  asked  the  judge  to  rule : 

"  1.  That  if  the  defendant's  conduct  led  the  plaintiff  to  pay  these 


DEDHAM  NATIONAL  BANK  V.   EVERETT  NATIONAL  BANK.   117 

cheques,  and  that  they  are  forgeries,  the  plaintiff  can  recover  unless 
there  was  an  unreasonable  delay  in  detecting  the  forgeries  and  that 
the  defendant  was  injured  thereby.  2.  That  on  all  the  evidence  the 
court  would  not  be  warranted  in  finding  that  the  defendant  has  suf- 
fered any  loss  through  any  lack  of  due  diligence  on  the  plaintiff's 
part  in  discovering  the  forgeries.  3.  If  the  cheques  were  forgeries,  and 
the  defendant  had  not  paid  on  account  of  them,  before  the  plaintiff 
notified  it  of  the  forgeries,  more  than  $150,  the  plaintiff  can  recover 
the  balance  paid  by  it  to  the  defendant  on  account  of  them,  namely, 
$200,  in  any  event.  4.  On  all  the  evidence  the  plaintiff  has  exercised 
due  diligence  in  discovering  the  forgeries.  5.  On  all  the  evidence, 
if  the  cheques  are  forgeries,  the  plaintiff  is  entitled  to  recover." 

The  judge  declined  to  give  these  rulings,  and  found  and  ordered 
judgment  for  the  defendant. 

[Argument  not  reported.] 

Holmes,  C.  J.  This  is  an  action  to  recover  the  amount  of  two 
forged  cheques  on  the  plaintiff  bank  paid  by  it  to  the  defendant.  Both 
cheques  were  drawn  payable  to  cash,  and  were  without  indorsement. 
Both  were  presented  for  deposit  to  the  account  of  Fenno,  a  depositor 
in  the  defendant  bank,  by  the  depositor's  clerk,  who  is  found  to  have 
been  the  forger,  the  first  on  July  31,  the  second  on  September  4, 
1897.  At  the  time  of  depositing  the  first,  which  was  for  $150,  the 
clerk  asked  for  and  received  $50  cash,  for  Fenno,  as  he  said,  and  on 
depositing  the  second,  which  was  for  $200,  he  got  $100  in  the  same 
way.  The  residue  of  the  two  cheques  was  credited  by  the  defendant 
to  Fenno  on  his  account.  Fenno  afterwards  overdrew  his  account, 
but  subsequently  made  the  overdraft  good,  and  his  deposit  has  ex- 
ceeded the  amount  of  the  credit  on  these  cheques  since  the  defendant 
was  notified  of  the  forgery.  Both  cheques  were  paid  by  the  plaintiff 
through  the  clearing-house,  and  it  is  found  that,  if  the  plaintiff's 
servant  who  paid  them  had  compared  the  signatures  on  the  cheques 
with  a  genuine  signature  of  the  supposed  maker  which  it  had  on  file, 
he  would  have  discovered  the  forgery.  Owing  to  an  examination  of 
Fenno's  deposit,  the  defendant  was  led  to  inquire  by  telephone, 
shortly  after  the  second  cheque  was  paid,  whether  the  signatures  were 
genuine,  and  was  answered  that  they  were  all  right.  The  plaintiff  did 
not  demand  repayment  until  February  25,  1898.  The  judge  found 
and  ordered  judgment  for  the  defendant.  The  plaintiff  asked  rulings 
in  favor  of  its  right  to  recover  either  the  whole  amount,  or  all  but 
the  sums  actually  paid  out  to  the  clerk,  and  the  case  is  here  on  excep- 
tions to  the  refusal  to  give  them. 

The  plaintiff's  argument  is  directed  to  proving  that  we  should  not 
adopt  the  rule  laid  down  in  Price  v.  Neal,  3  Burrows,  1354,  accord- 
ing to  which  a  drawee  paying  a  forged  draft  or  cheque  to  a  bona  fide 


118  acceptor's  contract. 

purchaser  cannot  recover  back  the  money  paid.  We  are  aware  that  this 
rule  has  been  questioned  by  some  text  writers.  But  it  is  of  such 
universal,  or  nearly  universal  acceptance  that  we  shall  go  into  no 
extended  discussion.  Gloucester  Bank  v.  Salem  Bank,  17  Mass.  33, 
42,  43 ;  National  Bank  of  North  America  v.  Bangs,  106  Mass.  441, 
444 ;  Welch  v.  Goodwin,  123  Mass.  71,  77 ;  First  National  Bank  of 
Danvers  v.  First  National  Bank  of  Salem,  151  Mass.  280,  283,  24 
N.  E.  44;  Bank  of  United  States  v.  Bank  of  Georgia,  10  Wheat.  333, 
348;  2  Daniel,  Neg.  Inst.  (3d  ed.)  §§  1359-1361. 

Probably  the  rule  was  adopted  from  an  impression  of  convenience 
rather  than  for  any  more  academic  reason;  or  perhaps  we  may  say 
that  Lord  Mansfield  took  the  case  out  of  the  doctrine  as  to  payments 
under  a  mistake  of  fact,  by  the  assumption  that  a  holder  who  simply 
:presents  negotiable  paper  for  payment  makes  no  representation  as  to 
the  signature,  and  that  the  drawee  pays  at  his  peril.  See  Wilkinson 
V.  Johnson,  3  Barn.  &  C.  428,  436 ;  Bernheimer  v.  Marshall,  2  Minn. 
78,  84 ;  Bank  of  St.  Albans  v.  Farmers'  &  Mechanics'  Bank,  10  Vt. 
141,  145,  146;  Ellis  v.  Trust  Co.,  4  Ohio  St.  628,  662. 

The  ground  of  a  recovery  for  a  payment  under  a  mistake  of  fact 
is  that  the  existence  of  the  fact  supposed  was  the  conventional  basis 
or  tacit  condition  of  the  transaction.  If  parties  are  so  far  at  arm's 
length  that  each  takes  the  risk  of  what  he  does,  of  course  one  of  them 
cannot  recover  money  paid  because  he  finds  that  he  has  made  a  mis- 
take. We  believe  that,  now  at  least,  especially  in  the  case  of  a  bank, 
it  is  a  matter  of  general  understanding  that,  when  the  holder  of  a 
cheque  in  no  way  contributes  to  the  deception,  the  bank  does  take  the 
risk  of  paying,  so  far  as  the  signature  is  concerned.  But  if  this  is  so 
mistake  disappears  as  a  ground  for  recovery,  and  there  is  no  other. 
It  is  vain  to  point  out  that  in  other  cases  more  or  less  analogous  there 
is  an  implied  representation,  e.  g.,  Eailroad  Co.  v.  Eichardson, 
135  Mass.  473.  The  grounds  for  difference  in  understanding  may  be 
very  nice,  but,  even  if  the  decisions  had  originated  the  difference 
without  adequate  ground,  when  once  it  exists  its  existence  is  a  suffi- 
cient reason  for  continuing  to  decide  in  accordance  with  it. 

The  plaintiff  attempts  to  make  out  that  the  defendant  led  the 
plaintiff  to  make  the  payment  by  requiring  no  indorsement  of  the 
cheques,  on  the  ground  that  its  officer  was  led  by  that  fact  to  suppose 
that  they  were  cashed  for  the  man  who  appeared  to  have  been  their 
maker.  The  attempt  to  prove  a  custom  that  would  justify  such  an 
inference  failed,  and  the  judge  may  not  have  believed  even  that  the 
officer  was  influenced  in  his  conduct  by  the  absence  of  an  indorse- 
ment. But  if  he  was,  the  evidence  did  not  show  any  duty  on  the 
part  of  the  defendant  to  anticipate  such  a  result. 

The  indorsement  of  the  cheque  by  the  defendant  was  not  an  in- 
dorsement by  the  payee.  It  was  not  an  indorsement  for  purposes  of 
transfer,  and  contained  no  representations  beyond  what  would  have 


DEDHAM  NATIONAL  BANK  V.   EVERETT  NATIONAL  BANK.   119 

been  imported  by  a  presentment  in  person.     Bank  v.  Bangs,  106 
Mass.  441,  444. 

In  view  of  the  ground  on  which  we  put  the  case,  it  does  not  seem 
to  be  necessary  to  consider  further  objections  to  the  plaintiff's  re- 
covery, or  to  examine  more  precisely  the  position  of  the  defendant  as 
a  purchaser  for  value.  Fox  v.  Bank,  30  Kan.  441,  1  Pac.  789 ;  Bank 
V.  Hartshorne,  3  Abb.  Dec.  173. 

Judgment  affirmed. 

Note.  —  Doubtless  the  true  theory  of  the  admission  by  the  acceptor  of 
the  drawer's  signature,  as  well  as  the  admission  of  funds,  is  that  such  was 
the  understanding  and  custom  of  merchants  and  bankers.  In  the  case  of  the 
Bank  of  the  United  States  v.  The  Bank  of  Georgia,  10  Wheat.  333,  Mr. 
Justice  Story,  in  delivering  the  opinion  of  the  court,  said  :  "  The  general 
question,  as  to  the  effect  of  acceptances,  has  repeatedly  come  under  the  con- 
sideration of  the  courts  of  common  law.  In  the  early  case  of  Wilkinson  i'. 
Lutwidge,  1  Sfcr.  648,  the  Lord  Chief  Justice  considered  that  the  acceptance  of 
the  bill  was,  in  an  action  against  the  acceptor,  a  sufficient  proof  of  the  hand- 
writing of  the  drawer;  but  it  was  not  conclusive.  In  the  subsequent  case  of 
Jenys  v.  Fowler,  2  Str.  946,  the  Lord  Chief  Justice  would  not  suffer  the  acceptor 
to  give  the  evidence  of  witnesses,  that  they  did  not  believe  it  the  drawer's 
handwriting,  from  the  danger  to  negotiable  notes  ;  and  he  strongly  inclined  to 
think  that  actual  forgery  would  be  no  defence,  because  the  acceptance  had 
given  the  bill  a  credit  to  the  indorsee.  Subsequent  to  this  was  the  case  of 
Price  V.  Neal,  3  Burr.  1355,  already  commented  on,  in  which  it  was  tliought 
the  acceptor  ought  to  be  conclusively  bound  by  his  acceptance.  The  correct- 
ness of  this  doctrine  was  recognized  by  Mr.  Justice  Buller,  in  Smith  v. 
Chester,  1  D.  &  E.  655,  by  Lord  Kenyon,  in  Barber  v.  Gingell,  3  Esq.  GO, 
where  he  extended  it  to  an  implied  acceptance;  and  by  IMr.  Justice  Dampier, 
in  Bass  i\  Clive,  4  M.  &  Selw.  L5,  and  it  was  acted  upon  by  necessary  im- 
plication by  the  court,  in  Smith  v.  Mercer,  6  Taunt.  76.  In  Levy  i\  The  Bank 
of  the  United  States,  1  Binn.  27,  already  referred  to,  where  a  forged  cheque, 
drawn  upon  the  bank,  had  been  accepted  by  the  latter,  and  carried  to  the 
credit  of  the  plaintiff,  and  on  the  refusal  of  the  bank  afterwards  to  pay  the 
amoi'.nt  the  suit  was  brought,  the  court  expressly  held  the  plaintiff  entitled 
to  recover,  upon  the  ground  that  the  acceptance  concluded  the  defendant.  The 
case  was  very  strong,  for  the  fraud  was  discovered  a  few  hours  only  after  the 
receipt  of  the  cheque,  and  immediate  notice  given.  But  this  was  not  thought 
in  the  slightest  degree  to  vary  the  legal  nisult.  '  Some  of  the  cases,'  said  the 
court,  '  decile  that  the  acceptor  is  bound,  because  the  acceptance  gives  a  credit 
to  the  bill,  etc.  But  tlie  modern  cases  certainly  notice  another  i-eason  for  his 
liability,  which  we  think  has  much  good  sense  in  it,  namely,  that  the  acceptor 
is  presumed  to  know  the  drawer's  handwriting,  and  by  his  acceptance  to  take 
this  knowledge  upon  himself.'  After  some  research,  we  have  not  been  able 
to  find  a  single  case,  in  which  the  general  doctrine,  thus  asserted,  has  been 
shaken,  or  even  doubted  ;  and  the  diligence  of  the  counsel  for  the  defendants 
on  the  present  occasion,  has  not  been  more  successful  than  our  own."  In 
that  case  the  defendant  was  sued  to  recover  the  value  of  certain  bank-notes 
issued  by  it,  which,  after  issue  had  been  fraudulently  altered,  and  had  then 
been  accepted  by  the  defendant  bank  and  placed  to  the  credit  of  the  plaintiff ; 
on  discovery  of  the  forgery,  the  defendant  tendered  the  notes  to  the  plaintiff 


120  acceptor's  contract. 

bank,  which  refused  to  receive  them.  The  court  held  that  the  case  was  within 
the  principle  quoted  supra,  and  that,  a  fortiori,  the  defendant  was  bound  to 
know  its  own  notes. 

The  same  principle  was  recognized  and  affirmed  by  the  Supreme  Court  of 
Vermont  in  Bank  of  St.  Albans  r.  Mechanics'  Bank,  10  Vt.  141 ;  and  by  the 
Supreme  Court  of  New  York  in  Goddard  v.  The  Merchants'  Bank,  4  N.  Y. 
(Conist.)  147,  in  which  case  Mr.  Justice  Ruggles  said,  "  The  rule  .  .  . 
should  not  be  departed  from  or  frittered  away  by  exceptions  resting  on  slight 
grounds."     See  Bigelow,  Bills  and  Notes,  223,  224 ;   Chitty  on  Bills,  206. 

1"he  last  two  cases  cited  supra  were  cases  of  cheques  to  which  the  principle 
is  equally  applicable. 

There  is,  however,  a  tendency  in  the  modern  decisions  toward  a  modifica- 
tion of  the  rule,  and  the  acceptance  (or  certification)  has  been  treated  as  a 
reconuiiendation  of  the  instrument  or  as  a  representation  of  its  genuineness; 
accordingly,  it  has  even  been  held  that  if  the  holder  has  taken  a  bill  before 
acceptance,  the  acceptor  will  not  be  precluded  from  setting  up  as  a  defence, 
the  forgery  of  the  drawer's  signature,  nor,  if  he  has  paid  the  bill,  from  recover- 
ing back  tlie  money.  McKelroy  v.  Southern  Bank  of  Kentucky,  14  La.  An. 
458.  So,  too,  it  has  been  held  that,  if  the  holder  has  indorsed  the  instrument 
for  the  purpose  of  passing  title,  the  drawee  in  accepting  or  paying,  does  not 
admit  that  the  signature  of  the  drawer  is  genuine,  on  the  ground  that,  by  in- 
dorsing, the  holder  has  warranted  the  genuineness  of  signatures  then  on  the 
instrument.     National  Bank  of  North  America  v.  Bangs,  106  Mass.  441. 

In  many  of  the  cases,  the  question  has  arisen  in  a  suit  by  the  drawee  to 
recover  back  money  paid  on  the  instrument,  as  paid  under  a  mistake  of  fact. 
The  action  is  that  for  money  had  and  received,  which  is  of  the  nature  of  a 
suit  in  equity;  such  was  the  case  of  Price  v.  Neal,  supra.  Possibly  this  fact 
explains  some  of  the  modifications  of  the  rule  of  the  law  merchant. 

In  Ellis  V.  Ohio  Ins.  Co.,  4  Ohio  St.  628,  651,  it  was  said  by  Mr.  Justice 
Ranney:  "There  is,  certainly,  no  room  for  the  application  of  technical  or 
arbitrary  rules,  in  determining  the  rights  of  the  parties.  Neither  the  form  of 
the  action  nor  the  nature  of  the  subject  permits  it.  The  action  is  brought  for 
money  had  and  received  ;  and  it  lies  in  all  cases,  where  one  has  the  money  of 
another,  which  he  cannot  in  equity  and  good  conscience  retain.  It  lies, 
therefore,  for  money  paid  by  mistake,  or  upon  a  consideration  which  has 
failed  ;  because,  in  such  case,  the  plaintiff  did  not  intend  to  give  his  money 
to  the  defendant,  and  the  latter  cannot  conscientiously  retain  money  for  which 
he  has  given  no  equivalent.  This  is  the  general  rule  ;  but  it  has  its  exceptions, 
as  well  settled  and  resting  upon  reasons  as  solid  and  satisfactory  as  the  rule 
itself.  Wherever  the  mistake  has  arisen  from  the  fault  or  negligence  of  the 
party  payins^  the  money,  and  cannot  be  corrected  without  prejudice  to  the 
party  who  has  received  it,  there  can  be  no  recovery,  and  simply  because 
the  plaintiff  is  alone  in  fault  ;  the  defendant  is  under  no  obligation  to  submit 
to  loss,  to  extricate  him  from  difficulty,  and  may  therefore  conscientiously  re- 
tain the  monf^y."  And  if  the  defendant  has  misled  the  draw^ee,  or  has  been 
negligent,  then,  it  is  said,  he  cannot  retain  the  money. 

Ill  point  of  theory,  at  least,  it  seems  that,  whetlier  the  action  is  upon  the 
instrument  to  recover  from  the  acceptor,  or  is  at  common  law  to  recover  back 
money  p;iid,  the  same  reason  ought  to  apply,  and  unless  mercantile  custom  has 
fixed  some  modification,  the  courts  ought  not  to  create  any  out  of  the  nature 
of  the  action,  by  which  it  is  attempted  to  enforce  a  supposed  right.  And 
custom  may  well  have  established  a  modification  of  the  rule ;  it  is  doubtless 


BANK   OF   COMMERCE   V.  UNION  BANK.  121 

according  to  custom  that  the  admission  is  only  in  favor  of  a  honaf.de  holder. 
So,  too,  custom  may  impose  upon  the  holder  the  burden  of  knowledge  of  the 
drawer's  signature.  In  Ellis  v.  Ohio  Ins.  Co.,  supra,  a  cheque  drawn  on  the 
plaintiffs  was  presented  to  the  defendant  for  discount  by  a  stranger ;  the  de- 
fendant discounted  the  cheque,  without  inquiry,  and  then  presented  it  to  the 
plaintiffs,  who  paid  it.  The  signature  of  the  drawer  of  the  cheque  was  a 
forgery,  and  upon  discovering  this  fact  the  plaintiffs  demanded  back  the 
money.  The  defendant  refused  to  refund  the  money,  and  this  action  was 
brought.  In  giving  judgment  for  the  plaintiffs,  the  court  said  that  there  was 
evidence  clearlj'  tending  to  prove  that  there  existed  "  a  general  custom  among 
the  banks  of  Cincinnati,  requiring  the  bank  taking  a  cheque  of  this  character, 
drawn  upon  another,  from  a  stranger,  to  be  satisfied,  by  inquiry,  of  his  right 
to  the  cheque,  and  of  the  person  from  whom  it  was  received  ;  and  as  clearly 
allowing  the  bank  upon  which  it  was  drawn,  to  rely  upon  the  presumption  that 
such  caution  had  been  exercised,  when  the  cheque  was  presented  for  payment." 
But  of.  Commercial  and  Farmers'  National  Bank  v.  First  National  Bank,  30 
Md.  11.     See  Bigelow,  Bills  and  Notes,  225. 

The  point  is,  that  payment  should  stand  on  the  same  footing  as  acceptance 
or  certification.  "  The  payment,  of  course,  involves  an  acceptance,"  and, 
further,  that  any  one  of  these  acts  is  more  than  a  recommendation  or  repre- 
sentation :  it  is,  in  fact,  an  admission  to  all  bona  fide  holders  that  the  instru- 
ment is  the  genuine  bill  or  cheque  of  the  drawer  of  it,  and  whether  the  holder 
took  before  acceptance  is  immaterial.  In  Price  v.  Neal,  one  bill  was  taken 
before  and  one  after  acceptance,  but  Lord  Mansfield  considered  the  holder's 
rights  to  be  the  same  in  both  instances.  See  also  language  in  Bank  of  the 
United  States  v.  Bank  of  Georgia,  supra,  and  in  Arpin  v.  Owens,  140  Mass. 
144,  ante,  p.  109,  note. 

In  Bernheimer  v.  Marshall,  2  Minn.  61,  it  was  held  that  the  drawee,  having 
paid  a  forged  draft  upon  him,  could  not  recover  from  the  holder,  although 
the  latter  had  said,  in  demanding  payment,  that  he  held  the  draft  of  X,  the 
supposed  drawer.  The  court  said,  "  Every  man  in  presenting  a  draft  for  pay- 
ment says,  in  substance,  either  expressly  or  by  implication,  '  here  is  the  draft 
of  A  B,  which  I  wish  you  to  pay.'  Such  a  statement  in  the  ordinary  course 
of  business  would  not  be  understood  as  a  warrantee  of  the  genuineness  of  the 
draft."  Nor  should  indorsement,  it  seems,  be  considered  as  such  a  warranty 
to  the  drawee.  It  is  true  that  an  indorser  vouches  for  the  genuineness  of  sig- 
natures upon  the  instrument  which  he  negotiates  ;  but  this  warranty  or 
admission  is  to  subsequent  holders,  and  not  to  the  drawee. 


BANK   OF    COMMERCE   v.   UNION   BANK. 
Court  of  Appeals  of  New  York,  April,  1850.     3  Comst.  230. 
But  the  acceptor  does  not  admit  that  the  body  of  the  bill  is  genuine. 

Assumpsit  by  the  drawee  of  a  bill  of  exchange  against  the  late 
holder  to  recover  the  amount  thereof  paid  to  him,  as  paid  imder  mis- 
take of  fact.  The  bill  as  originally  drawn  was  a  request  to  the  plain- 
tiff to  pay  "  one  hundred  and  five  dollars  to  the  order  of  J.  Durand." 
After  it  was  delivered  the  word  "  hundred  "  was  fraudulently  altered 


122  acceptor's  contract. 

to  "  Ihonsand,"  and  the  name  "  Diirand  "  to  "  Bonnet."  J.  Bonnet 
now  indorsed  it  for  value  and  without  notice  to  the  State  Bank  of 
Charleston,  which  sent  it  for  collection  to  the  defendant;  to  which 
the  plaintiff  paid  it  at  sight,  in  ignorance  of  the  alterations.  The 
alterations  having  afterwards  come  to  light,  the  plaintiff  demanded 
of  the  defendant  the  return  of  the  money,  which  was  refused. 

The  court  below  charged  the  jury  that  on  such  facts  the  plaintiff 
would  be  entitled  to  recover.  The  defendant  excepted.  Judgment 
for  the  plaintiff;   appeal  by  the  defendant. 

[Argument  reported.] 

EuGGLES,  J,  The  payment  of  a  bill  of  exchange  by  the  drawee  is 
ordinarily  an  admission  of  the  drawer's  signature,  which  he  is  not 
afterwards,  in  a  controversy  between  himself  and  the  holder,  at  lib- 
erty to  dispute;  and  therefore  if  the  drawer's  signature  is  on  a  sub- 
sequent day  discovered  to  be  a  forgery,  the  drawee  cannot  compel 
the  holder  to  whom  he  paid  the  bill  to  restore  the  money  unless  the 
holder  be  in  some  way  implicated  in  the  fraud.  Price  v.  Neal,  3  Burr. 
1354.^  This  rule  is  founded  on  the  supposed  negligence  of  tlie 
drawee  in  failing,  by  an  examination  of  the  signature  when  the  bill 
is  presented,  to  detect  the  forgery  and  refuse  payment.^ 

The  drawee  is  supposed  to  know  the  handwriting  of  the  drawer, 
who  is  usually  his  customer  or  correspondent.  As  between  him, 
therefore,  and  an  innocent  holder,  the  pa3'cr,  from  his  imputed  negli- 
gence, must  bear  the  loss.  In  Price  v.  Neal  the  plaintiff  had  paid  to 
Neal,  the  holder,  two  bills  of  exchange  purporting  to  be  drawn  on 
him  by  Sutton,  whose  name  was  forged.  On  discovery  of  the  forgery 
Price  brought  his  action  against  Neal  to  recover  back  the  money  as 
paid  by  mistake.  Lord  Mansfield,  in  delivering  the  opinion  of  the 
court  in  favor  of  the  defendant,  said  "  it  was  incumbent  upon  the 
plaintiff  to  be  satisfied  that  the  bill  drawn  upon  him  was  the  drawer's 
hand  before  he  accepted  or  paid  it,  but  it  was  not  incumbent  upon 
the  defendant  to  inquire  into  it."  "  Whatever  neglect  there  was,  was 
on  his  side.  It  is  a  misfortune  which  has  happened  without  the 
defendant's  fault  or  neglect." 

But  it  is  plain  that  the  reason  on  which  the  above  rule  is  founded 
does  not  apply  to  a  case  where  the  forgery  is  not  in  counterfeiting  the 
name  of  the  drawer,  but  in  altering  the  body  of  the  bill.  There  is  no 
ground  for  presuming  the  body  of  the  bill  to  be  in  the  drawer's  hand- 
writing, or  in  any  handwriting  kno-uai  to  the  acceptor.  In  the  pres- 
ent case  that  part  of  the  bill  is  in  the  handwriting  of  one  of  the  clerks 
in  the  office  of  the  Canal  and  Banking  Company  in  New  Orleans. 

1  Ante,  p.  113.  '  Quoere,  see  p.  119,  note. 


BANK  OF  COMMERCE  V.   UNION  BANK.  123 

The  signature  was  in  the  name  and  handwriting  of  the  cashier.  The 
signature  is  genuine.^  The  forgery  was  committed  by  altering  the 
date,  number,  amount,  and  payee's  name.  No  case  goes  the  length 
of  saying  that  the  acceptor  is  presumed  to  know  the  handwriting  of 
the  body  of  the  bill,  or  that  he  is  better  able  than  the  indorsers  to 
detect  an  alteration  in  it.  The  presumption  that  the  drawee  is  ac- 
quainted with  the  drawer's  signature,  or  able  to  ascertain  whether  it 
is  genuine,  is  reasonable.  In  most  cases  it  is  in  conformity  with  the 
fact.  But  to  require  the  drawee  to  know  the  handwriting  of  the  resi- 
due of  the  bill  is  unreasonable.  It  would,  in  most  cases,  be  requiring 
an  impossibility.  Such  a  rule  would  be  not  only  arbitrary  and  rigor- 
ous, but  unjust.  The  drawee  would  undoubtedly  be  answerable  for 
negligence  in  paying  an  altered  bill,  if  the  alteration  were  manifest 
on  its  face.  "Whether  it  was  so  or  not  in  this  case  was  properly  sub- 
mitted to  the  jury,  who  found  that  it  was  paid  by  mistake  and  with- 
out knowledge  of  or  reason  to  suspect  the  fraudulent  alterations.  It 
would  have  been  difficult  to  find  otherwise  upon  the  evidence,  the  bill 
having  passed  through  the  defendants'  bank  and  the  Charleston  Bank 
without  suspicion.  If  the  forgery  had  been  in  the  name  of  the 
drawer,  it  might  not  perhaps  have  been  incumbent  on  those  banks  to 
scrutinize  the  bill,  because  they  might  have  relied  on  the  drawer's 
better  knowledge  of  the  hand;  but  the  forgery  being  in  the  body  of 
the  bill,  the  plaintiffs  were  not  more  in  fault  than  the  defendants. 

The  greater  negligence  in  a  case  of  this  kind  is  chargeable  on  the 
party  who  received  the  bill  from  the  perpetrator  of  the  forgery.  So 
far  as  respects  the  genuineness  of  the  bill,  each  indorser  receives  it  on 
the  credit  of  the  previous  indorsers ;  and  it  was  the  interest  and  duty, 
in  the  present  case,  of  the  Bank  of  Charleston  to  satisfy  itself  that 
the  bill  was  genuine,  or  that  its  immediate  indorser  was  able  to 
respond  in  case  the  bill  should  prove  to  be  spurious.  The  party  who 
fraudulently  passed  the  bill  cannot  avoid  his  liability  to  refund  on 
the  pretence  of  delay  in  detecting  the  forgery  or  in  giving  notice  of 
it ;  and  if  reasonable  diligence  is  exercised  in  giving  notice  after  the 
forgery  comes  to  light,  it  is  all  that  any  of  the  parties  can  require. 
Canal  Bank  v.  The  Bank  of  Albany,  1  Hill,  287,  293,  293. 

In  Smith  i>.  Mercer,  6  Taunt.  76,  in  Cocks  v.  Masterman,  9  Barn. 
&  C.  902,  and  in  Price  v.  Neal,  3  Burr.  1354,  the  plaintiffs  who  paid 
the  forged  bills,  being  chargeable  with  a  knowledge  of  the  signature 
of  the  drawer  (which  was  forged),  were  held  to  have  paid  it  negli- 
gently and  without  due  caution  and  examination,  and  on  that  ground 
it  was  that  the  defendants  to  whom  they  paid  the  money  were  held 
not  liable  without  immediate  notice  of  the  forgery.  But  in  the 
present  case  no  such  negligence  is  imputable  to  the  plaintiffs,  the 
plaintiffs  being  no  more  capable  of  detecting  the  forged  alteration  by 
inspection  of  the  bill  than  either  of  the  other  parties. 

1  Cf.  National  Park  Bank  v.  Ninth  National  Bank,  46  N.  Y.  77. 


124  -  acceptor's  contract. 

This  action  is  not  founded  on  the  bill  as  an  instrument  containing 
the  contract  on  which  the  suit  is  brought.  The  acceptor  can  never 
have  recourse  on  the  bill  against  the  indorsers.  But  the  plaintiff's 
right  of  recovery  rests  on  equitable  grounds.^  In  the  Canal  Bank  v. 
The  Bank  of  Albany  the  principle  was  recognized,  that  money  paid 
by  one  party  to  another  through  mutual  mistake  of  facts  in  respect 
to  which  both  were  equally  bound  to  inquire,  may  be  recovered  back. 
The  defendants  here,  as  in  that  case,  have  obtained  the  money  of  the 
plaintiff  without  right  and  on  the  exhibition  of  a  forged  title  as 
genuine,  the  forgery  being  unknown  to  both  parties.  The  defendants 
ought  not  in  conscience  to  retain  the  money,  because  it  does  not  belong 
to  them ;  and  for  the  further  reason  that  the  defendants  and  the  pre- 
vious indorsers  have  each,  on  the  same  principle,  their  remedy  over 
against  the  party  to  whom  they  respectively  paid  the  money,  until 
the  wrong-doer  is  finally  made  to  pay.  If  that  party  should  be  irre- 
sponsible, or  if  he  cannot  be  found,  the  loss  ought  to  fall  on  the 
party  who,  without  due  caution,  took  the  bill  from  him. 

In  cases  where  no  negligence  is  imputable  to  the  drawee  in  failing 
to  detect  the  forgery,  the  want  of  notice  within  the  ordinary  time  to 
charge  the  previous  parties  to  the  bill  is  excused,  provided  notice  of 
the  forgery  be  given  as  soon  as  it  is  discovered.^ 

Judgment  affirmed. 

1  See  note,  ante,  pp.  119  e<  seq. 

2  But  cf.  London  Bank  v.  Bank  of  Liverpool,  1896,  1  Q.  B.  7,  Mathews,  J.,  of  cases 
in  which  there  are  parties  entitled  to  notice  of  dishonor.  Also  Imperial  Bank  v.  Bank 
of  Hamilton,  1903,  A.  C.  49  j  and  post,  p.  148. 


CARR  V.   NATIONAL   SECURITY  BANK.  125 


CHAPTER   VI. 

certifier's  contract. 


CAEE  V.  NATIONAL    SECUEITY   BANK. 

Supreme  Court  of  Massachusetts,  March,  1871.     107  Mass.  45. 

A  bank  is  not  liable  to  the  holder  of  a  cheque,  drawn  upon  it,  unless  it  has  certified 
the  cheque.! 

Contract  by  the  payee  against  the  drawees,  on  a  bank  cheque.  The 
declaration  alleged  that  the  defendants  were  a  banking  corporation 
of  deposit,  discount,  and  circulation,  doing  business  in  Boston,  and 
the  firm  of  Lincoln  &  Co.  on  and  before  May,  1868,  "  were  cus- 
tomers of  and  depositors  in  said  bank,  and  had  been  accustomed  to 
deposit  money  in  said  bank,  and  draw  their  cheques  upon  the  same, 
and  said  bank,  in  consideration  that  said  firm  would  so  deposit  funds 
in  said  bank,  promised  and  agreed  with  said  firm  to  pay  all  cheques 
and  drafts  of  said  firm  on  said  bank,  when  in  funds  of  said  firm  to 
pay  the  same,  and  said  bank  had  for  a  long  time  previous  to  May, 
1868,  so  paid  said  drafts  and  cheques  of  said  firm ; "  that  Lincoln  & 
Co.  on  May  2,  1868,  in  consideration  of  $600  paid  to  them  by 
the  plaintiff,  drew  their  cheque  upon  the  defendants  for  the  sum  of 
$600  payable  to  the  plaintiff's  order,  and  the  plaintiff  duly  presented 
it  to  the  defendants  at  their  place  of  business,  and  demanded  pay- 
ment of  it ;  that  "  at  the  time  of  the  presentment  and  demand  the 
defendants  were  indebted  to  said  firm,  and  said  firm  had  funds  in 
the  bank,  against  and  upon  which  they  were  entitled  to  draw  the 
cheque,  to  a  greater  amount  than  $600  " ;  but  that  the  defendants 
refused  to  pay  the  cheque,  and  have  never  paid  it  or  any  part  of  it; 
and  that  the  plaintiff  continues  to  be  the  holder  of  the  cheque,  and 
no  part  of  it  has  ever  been  paid  to  him,  and  he  has  never  been  able 
to  collect  it,  or  any  part  if  it,  from  Lincoln  &  Co.  A  copy  of  the 
cheque  was  annexed. 

The  defendants  demurred,  on  the  ground  that  no  legal  cause  of 
action  was  stated,  because  the  declaration  did  not  set  forth  any 
agreement,  express  or  implied,  of  the  defendants  with  the  plaintiff', 
to  pay  the  cheque.  The  Superior  Court  sustained  the  demurrer,  and 
ordered  judgment  for  the  defendants;    and  the  plaintiff  appealed. 

[Argument  reported.] 

1  N.  I.  L.  §  206. 


126  certifier's  contract. 

Gray,  J.  It  is  a  general  rule  of  law,  that  upon  a  promise  made 
by  one  person  to  another,  for  the  benefit  of  a  third  from  whom  no 
consideration  moves,  the  latter  cannot  sue;  and  the  exception  to 
tliis  rule,  which  holds  a  person,  in  whose  hands  funds  have  been 
placed  to  pa}^  creditors  of  the  depositor,  liable  to  actions  by  them, 
has  not  been  extended,  in  this  Commonwealth  or  in  England,  to  a 
case  in  which  neither  such  creditors  nor  the  amounts  of  their  debts 
are  named  or  ascertained  at  the  date  of  the  promise.  Mellen  v. 
Whipple,  1  Gray,  317;  Dow  v.  Clark,  7  Gray,  198;  Frost  v.  Gage, 
1  Allen,  262 ;  Fairlie  v.  Denton,  8  B.  &  C.  395 ;  s.  c.  2  Man.  &  Eyl. 
353 ;  Gerhard  v.  Bates,  2  El.  &  Bl.  476.  And  by  our  law  a  promise 
to  the  drawer  by  the  drawee  of  a  negotiable  draft  or  bill  of  exchange 
to  accept  and  pay  the  same  does  not  make  the  drawee  liable  to  an 
action  by  a  holder,  unless  he  has  taken  the  draft  on  the  faith  of  such 
promise;  but  is  a  mere  chose  in  action,  upon  which  he  only  to  whom 
it  was  made  can  sue.  Exchange  Bank  v.  Eice,  98  Mass.  288,  and  107 
Mass.  37.^  In  the  cases,  mentioned  at  the  argument,  of  general  letters 
of  credit  and  public  offers  of  reward,  the  person  who,  by  making 
an  advance  in  the  one  case,  or  doing  the  acts  specified  in  the  offer 
in  the  other,  accepts  the  proposition  of  the  defendant,  becomes  him- 
self the  other  party  to  the  contract,  and  the  one  from  whom  the 
consideration  moves. 

The  plaintiff  in  the  present  case  docs  not  allege  that  the  defendants 
made  any  promise  to  him,  or  that  he  did  anything  upon  the  faith 
of  their  promise  to  the  drawer,  or  even  knew  of  that  promise  when 
he  took  the  cheque  sued  on.  The  relation  between  the  defendants  and 
the  drawer,  as  disclosed  in  the  declaration,  was  simply  the  ordinary 
one  of  bankers  and  customer,  which  is  a  relation  of  debtor  and 
creditor,  not  of  agent  and  principal,  or  trustee  and  cestui  que  trust. 
The  bankers  agree  with  their  customer  to  receive  his  deposits,  to 
account  with  him  for  them,  to  repay  them  to  him  on  demand,  and 
to  honor  his  cheques  to  the  amount  for  which  they  are  accountable 
to  him  when  the  cheques  are  presented ;  and  for  any  breach  of  that 
agreement  they  are  liable  to  an  action  by  him.  But  the  money 
deposited  becomes  the  absolute  property  of  the  bankers,  impressed 
with  no  trust,  and  which  they  may  dispose  of  at  their  pleasure, 
subject  only  to  their  personal  obligation  to  the  depositor  to  pay  an 
equivalent  sum  upon  his  demand  or  order.  The  right  of  the  bankers 
to  use  the  money  for  their  own  benefit  is  the  very  consideration  for 
their  promise  to  the  depositor.  They  make  no  agreement  with  the 
holders  of  his  cheques.  A  cheque  drawn  by  him  in  common  form,  not 
designating  any  special  fund  out  of  which  it  is  to  be  paid,  nor  cor- 
responding to  the  whole  amount  due  to  him  from  the  banlcers  at  the 
time,  is  a  mere  contract  between  the  drawer  and  the  payee,  on  which, 

1  8.  c.  107  Mass.  37,  ante,  p.  95. 


CARR   V.   NATIONAL   SECURITY  BANK.  127 

if  payable  to  bearer,  and  not  paid  by  the  drawees,  any  holder  might 
doubtless  sue  the  drawer  (as  suggested  in  Ancona  v.  Marks,  7  H.  & 
IST.  686,  696,  cited  for  the  plaintilT),  but  which  passes  no  title,  legal 
or  equitable,  to  the  payee  or  holder,  in  the  moneys  previously  paid 
to  the  bankers  by  the  drawer;  and  the  bankers'  promise  to  the 
drawer  to  honor  his  cheques  does  not  render  them,  while  still  liable 
to  account  with  him  for  the  amount  of  any  cheque  as  part  of  his 
general  balance,  liable  to  an  action  of  contract  by  the  holder  also, 
unless  they  have  made  a  direct  promise  to  the  latter,  by  accepting 
the  cheque  when  presented,  or  otherwise.  The  view,  thus  briefly 
stated,  is  in  accordance  with  the  law  as  established  in  England,^  in 
'New  York,  and  in  Pennsylvania,  with  the  opinions  heretofore  ex- 
pressed by  this  court,  and  with  the  recent  unanimous  decision  of  the 
Supreme  Court  of  the  United  States.  Foley  v.  Hill,  1  Phil.  Ch. 
399,  and  2  H.  L.  Cas.  28;  Parke,  B.,  in  Bellamy  v.  Marjoribanks, 
7  Exch.  389,  404;  Addison  on  Con.  (6th  ed.)  810;  Chapman  v. 
\^aiite,  2  SeldeD,  412,  417;  Loyd  v.  McCaffrey.  46  Penn.  St.  410, 
414;  Bullard  v.  Eandall,  1  Gray,  605;  Dana  v.  Third  National 
Bank,  13  Allen,  445;  Bank  of  the  Eepublic  v.  Millard,  10  Wallace, 
152. 

Judgment  for  the  defendants  affirmed. 

Note.  —  In  some  States  it  is  held  that  if  the  drawer  of  a  cheque  has  on 
deposit  sufficient  funds  to  meet  it,  the  bank  is  liable  to  an  action  by  the 
holder,  if  it  refuses  to  pay  the  cheque  on  demand.  In  Munn  v.  Burch,  25  111. 
21,  26,  it  was  said  :  "  We  hold,  then,  that  the  cheque  of  a  depositor  upon  his 
banker,  delivered  to  another  for  value,  transfers  to  that  other  the  title  to  so 
much  of  the  deposit  as  the  cheque  calls  for,  which  may  again  be  transferred  to 
another  by  delivery,  and  when  presented  to  the  banker  he  becomes  the  holder 
of  the  money  to  the  use  of  the  owner  of  the  cheque,  and  is  bound  to  account 
to  him  for  that  amount,  provided  the  party  drawing  the  cheque  has  funds  to 
that  amount  on  deposit,  subject  to  his  cheque  at  the  time  it  is  presented." 
In  Gage  Hotel  Co.  v.  Union  National  Bank,  171  111.  531,  49  N.  E.  Rep.  420,  it 
was  held  that  the  holder  of  a  cheque  could  maintain  an  action  against  the 
drawee  bank,  upon  refusal  to  pay  the  cheque,  although  the  drawer  had 
countermanded  payment  before  the  cheque  was  presented,  sufficient  funds 
being  on  deposit  with  which  to  pay ;  the  ground  of  the  decision  was  that 
there  is  a  contract,  implied  in  law,  on  the  part  of  the  bank  to  pay  the  holder 
upon  presentment  of  the  cheque.  It  was  said,  quoting  the  language  of  the 
court  in  Munn  v.  Burch,  supra,  that  there  is  "  '  a  privity  of  contract  between 
the  banker  and  the  holder  of  the  cheque,  created  by  the  implied  promise  held 
out  to  the  world  by  the  banker  on  the  one  side,  and  the  receiving  of  the  cheque 
for  value,  and  presenting  it  on  the  other.'"  See  also  Roberts  v.  Austin,  26 
Iowa,  324  ;  Dillman  v.  Carlin,  105  Wis.  14,  80  N.  W.  Rep.  932  ;  Simmons 
Hardware  Co.  v.  Greenwood  Bank,  41  So.  Ca.  177,  19  S.  C.  Rep.  502  ;  Covert 
V.  Rhodes,  48  Ohio  St.  66. 

The  Supreme  Court  of  the  United  States,  however,  has  laid  down  the  rule 
as  in  the  principal  case.     In  Bank  of  The  Republic  v.  Millard,  10  Wall.  152, 

1  Bilk  of  Exchange  Act,  §§  53  (1),  73,  74  (3). 


128  certifier's  contract. 

Millard  sued  the  bank  to  recover  the  amount  of  a  cheque  drawn  upon  it  to 
his  order.  The  defendant  bank  asked  the  court  to  charge  "  that  unless  the 
jury  were  satisfied  from  the  evidence  that  it  accepted  the  cheque  in  favor  of 
the  plaintiff,  .  .  .  he  was  not  entitled  to  recover."  The  court  refused  to  give 
this  instruction,  and  the  jury  found  a  verdict  for  Millard. 

In  reversing  the  judgment  of  the  lower  court,  the  Supreme  Court  said,  per 
Mr.  Justice  Davis,  "  It  is  important  .  .  •  that  there  should  be  no  mistake 
about  the  status,  which  the  holder  of  a  cheque  sustains  toward  the  bank  on 
which  it  is  drawn.  It  is  very  clear  that  he  can  sue  the  drawer  if  payment  is 
refused  ;  but  cau  he  also,  in  such  a  state  of  case,  sue  the  bank  ?  It  is  conceded 
that  the  depositor  can  bring  assumpsit  for  the  breach  of  the  contract  to  honor  his 
cheques ;  and  if  the  holder  has  a  similar  right,  then  the  anomaly  is  presented  of 
a  right  of  action  on  one  promise,  for  the  same  thing,  existing  in  two  distinct 
persons  at  the  same  time.  On  principle,  there  can  be  no  foundation  for  an 
action  on  the  part  of  the  holder,  unless  there  is  privity  of  contract  between 
him  and  the  bank,  llow  can  there  be  such  a  privity  when  the  bank  owes  no 
duty  and  is  under  no  obligation  to  the  holder?  The  holder  takes  the  cheque 
on  the  credit  of  the  drawer,  in  the  belief  that  he  has  funds  to  meet  it,  but  iu 
no  sense  can  the  bank  be  said  to  be  connected  with  the  transaction." 


WILEY  V.  BUNKEK   HILL   NATIONAL   BANK. 

Supreme  Court  of  Massachusetts,  June,  1903.     183  Mass.  495;  67  N.  E.  Rep. 

655. 

But  it  is  liable  to  a  depositor  for  refusal  to  honor  his  cheques,  in  contract  or  tort. 

Contract  and  tort,  by  a  trader  engaged  in  the  business  of  buying 
and  selling  coal  and  wood  in  that  part  of  Boston  called  Charlestown, 
against  a  bank  for  refusing  to  pay  certain  cheques  of  the  plaintiff, 
thereby  injuring  his  credit.     Writ  dated  February  25,  1898. 

At  the  trial  in  the  Superior  Court  before  Richardson,  J.,  the 
jury  returned  a  verdict  for  the  plaintiff  in  the  sum  of  $25,000,  of 
which  he  was  required  by  the  judge  to  remit  all  in  excess  of  $10,000. 
The  defendant  alleged  exceptions. 

[Argument  not  reported.] 

Morton,  J.  This  is  an  action  to  recover  damages  for  the  refusal 
by  the  defendant  to  honor  certain  cheques  drawn  on  it  by  the 
plaintiff  against  a  deposit  subject  to  cheque  which  he  had  with  the 
defendant,  and  which  was  more  than  sufficient  to  meet  the  cheque  so 
drawn  when  presented.  The  action  is  described  in  the  writ  as  in 
contract  and  tort,  it  being  doubtful  to  which  class  it  belongs.  The 
declaration  contains  eight  counts.  The  eighth  count  was  waived 
at  the  trial  and  the  case  proceeded  on  the  remaining  counts,  each 
count  representing  a  different  cheque.  There  was  a  verdict  for  the 
plaintiff,  and  the  case  is  here  on  exceptions  by  the  defendant  to  the 


WILEY  V.   BUNKER   HILL  NATIONAL  BANK,  129 

■refusal  of  the  presiding  judge  to  give  certain  rulings  asked  for  by  it, 
and  to  the  giving  by  him  of  certain  rulings  requested  by  the  plaintiff. 
There  is  also  an  appeal  by  the  defendant  from  the  overruling  of  a 
demurrer  to  the  declaration.  This  has  not  been  argued  and  we 
therefore  treat  it  as  waived. 

A  bank  is  bound  to  honor  cheques  drawn  on  it  by  a  depositor  if 
it  has  sufficient  funds  belonging  to  the  depositor  when  the  cheque 
is  presented  and  the  funds  are  not  subject  to  any  lien  or  claim,  and 
for  its  refusal  or  neglect  to  do  so  it  is  liable  to  an  action  by  the 
depositor.  National  Mahaiwe  Bank  v.  Peck,  127  Mass.  298 ;  Carr  v. 
National  Security  Bank,  107  Mass.  45,  48 ;  Dana  v.  Third  National 
Bank,  13  Allen,  445,  448 ;  Marzetti  v.  Williams,  1  B.  &  A.  415 ;  Kolin 
V.  Steward,  14  C.  B.  595;  American  National  Bank  v.  Morey,  69 
S.  W.  Rep.  759 ;  Hopkinson  v.  Forster,  L.  R.  19  Eq.  74 ;  2  Parsons, 
Notes  and  Bills,  62,  63;  2  Dan.  Neg.  Instr.  §  1642;  5  Am.  and 
Eng.  Encyc.  of  Law  (2d  ed.),  1059,  1060. 

The  cause  of  action,  though  sometimes  spoken  of  as  in  the  nature 
of  a  tort,  arises  out  of  a  breach  of  the  contract  implied  from  the 
relation  of  the  parties,  that  the  banker  will  honor  the  cheques  of  the 
depositor,  and  the  party  aggrieved  may  recover,  as  in  other  cases  of 
a  breach  of  contract,  for  the  damages  that  are  the  natural  and  reason- 
able consequences  of  the  breach.  Special  damages  may  also  be  recov- 
ered if  they  are  properly  alleged.  Marzetti  v.  Williams,  Rolin  v. 
Steward,  and  Hopkinson  v.  Forster,  ubi  supra;  Prehn  v.  Royal  Bank 
of  Liverpool,  L.  R.  5  Ex.  92 ;  Larios  v.  Bonany  y  Gurety,  L.  R. 
5  P.  C.  346;  Fleming  v.  Bank  of  New  Zealand  (1900),  A.  C.  577; 
Patterson  v.  Marine  National  Bank,  130  Penn.  St.  419,  433 ;  Schaff- 
ner  v.  Ehrman,  139  111.  109 ;  James  v.  Continental  National  Bank, 
105  Tenn.  1;  Svendsen  v.  State  Bank  of  Duluth,  64  Minn.  40; 
American  National  Bank  v.  Morey,  69  S.  W.  Rep.  759;  Robey  v. 
Oriental  Bank,  2  New  South  Wales,  n.  s.  56,  63. 

In  the  case  of  a  trader  injury  to  his  credit  may  be  inferred  from' 
the  fact  that  he  is  a  trader,  and  substantial  damages  may  be  foundi 
and  given  upon  proof  of  that  fact  without  anything  more.  In  the 
case  of  a  person  who  is  not  a  trader,  if  no  special  damages  are 
alleged  and  proved,  nominal  damages  at  least  may  be  recovered.  In 
the  present  case  the  declaration  alleges  that  the  plaintiff  was  and  had 
been  a  trader  engaged  in  the  business  of  buying  and  selling  coal  and 
wood  in  Charlestown,  and  there  was  evidence  tending  to  show  that 
his  business  amounted  to  $150,000  yearly.  It  was  competent,  there- 
fore, for  the  jury  to  find  and  award  substantial  damages,  and  the 
ruling  requested  that  the  plaintiff  could  recover  only  nominal  dam- 
ages was  rightly  refused,  unless  the  rulings  requested  in  regard  to 
set-off  should  have  been  given.  For  reasons  already  given  the  first 
request  was  also  rightly  refused,  as  was  also  that  part  of  the  second 
which  sought  to  limit  the  defendant's  liability  to  the  amount  of  the 

9 


130  certifier's  contract. 

plaintiff's  funds  in  its  hands  or  to  the  amount  of  the  cheque  or 
cheques  that  were  refused  payment.  The  rest  of  the  second  request 
was  given. 

The  remaining  question  relates  to  the  right  in  equity  of  the  de- 
fendant to  set  off  by  reason  of  the  plaintiff's  insolvency  against  the 
deposit  two  unmatured  notes  made  by  the  plaintiff  and  discounted 
an^  held  by  the  defendant.  This  is  an  action  at  law  and  the  defend- 
ant concedes  that  there  is  no  right  of  set-off  at  law.  But  it  contends 
that  the  plaintiff  being  in  fact  insolvent  at  the  time  when  the  cheques 
in  question  were  drawn  and  presented,  it  had  the  right  in  equity  to 
refuse  payment  and'  to  apply  the  deposit  to  the  notes  held  by  it 
against  the  plaintiff,  notwithstanding  they  had  not  matured.  No 
question  is  made  as  to  the  defendant's  right  to  deduct  the  demand 
notes  from  the  plaintiff's  deposit;  but  the  plaintiff  contends  that 
neither  in  equity  nor  at  law  had  the  defendant  the  right  to  set  off  the 
notes  that  were  not  due.  It  is  to  be  observed  that  the  answer  does 
not  in  terms  at  least  aver  that  the  defendant  had  a  right  to  an 
equitable  set-off,  and  acted  thereunder,  though  it  alleges  that  the 
plaintiff  was  in  fact  insolvent  prior  to  the  presentment  of  the  cheques. 
But  this  objection  has  not  been  taken.  At  the  time  when  the  defend- 
ant refused  to  pay  or  honor  the  cheque  in  question  no  proceedings 
had  been  instituted  by  or  against  the  plaintiff  to  have  him  adjudged 
insolvent.  He  had  not  made  the  common-law  assignment  which  he 
subsequently  made.  For  aught  that  appears  he  was  in  good  standing 
and  credit  and  could  have  gone  on  indefinitely  as  he  had  been  going 
on  unless  confronted  with  unfavorable  conditions.  The  defendant 
required  him  to  make  a  statement  of  his  assets  and  liabilities,  which 
he  did,  and  thereupon,  it  appearing  that  his  liabilities  exceeded  his 
assets,  tlie  defendant  decided  that  he  was  insolvent,  and  refused  to 
honor  cheques  which  he  had  previously  given,  and  claimed  the  right 
to  set  off  the  unmatured  notes  against  the  deposit.  If  proceedings  in 
insolvency  or  bankruptcy  had  been  instituted  by  or  against  the  plain- 
tiff at  or  before  the  presentment  of  the  cheques,  or  even  if  the  plain- 
tiff had  made  an  assignment  at  common  law  fo^  the  benefit  of  his 
creditors,  the  case  would  no  doubt  have  stood  differently.  The  de- 
fendant has  cited  many  cases,  including  several  from  the  Supreme 
Court  of  the  United  States,  in  which  it  contends  that  the  doctrine  of 
equitable  set-off  has  been  applied  in  favor  of  banks  and  others  under 
circumstances  similar  to  those  in  this  case.  The  last  case  cited  from 
the  United  St«ites  Supreme  Court  is  Scott  v.  Armstrong,  146  U.  S. 
499,  It  was  there  laid  down  that  where  mutual  credits  and  obliga- 
tions have  grown  out  of  and  are  connected  with  the  same  transaction, 
insolvency  on  the  one  hand  will  justify  setting  off,  in  equity,  the  debt 
du§  upon  the  other.  The  Chief  Justice  said  in  the  course  of  the 
opinion,  "  In  the  case  at  bar  the  credits  between  the  banks  were 
reciprocal  and  were  parts  of  the  same  transaction,  in  which  each  gave 


MINOT   V.   EUSS.  131 

credit  to  the  other  on  the  faith  of  the  simultaneous  credit,  and  the 
principle  applicable  to  mutual  credits  applied,"  and  it  was  held  that, 
under  the  circumstances  there  shown,  there  was  a  right  of  set-off  in 
equity.  The  case  would  hardly  seem  to  warrant  the  broad  rule  con- 
tended for  by  the  defendant.  But  without  undertaking  to  review  all 
the  cases  cited  by  the  defendant,  and  conceding,  as  the  defendant 
contends,  that  the  right  of  equitable  set-off  exists  independently  of 
statute,  and  of  insolvency  or  bankruptcy,  we  think  that  the  present 
case  is  concluded  by  Spaulding  v.  Baclais,  123  Mass.  553.  In  that 
case  the  court  said,  "  A\Tiatever  may  be  the  rights  of  a  party  whose 
debt  is  due  and  payable,  to  compel  an  insolvent  debtor  to  set  off  a 
claim  against  him  not  due,  —  which  question  we  are  not  called  upon 
here  to  decide,  —  we  are  clearly  of  opinion  that  a  party,  whose  debt 
is  not  due,  has  no  equitable  claim  to  have  it  set  off  against  a  debt  of 
his  own,  already  due,  in  the  hands  of  a  party  who  is  insolvent."  It 
seems  to  us  that  this  is  decisive  of  the  case  before  us.  See  also  In  re 
Commercial  Bank  Corporation  of  India,  L.  R.  1  Ch.  538. 

It  is  to  be  observed  that  the  jury  returned  a  verdict  for  the  plain- 
tiff, and  they  must  be  taken  to  have  found  that  he  was  solvent,  ac- 
cording to  the  usual  meaning  of  that  term  (Thompson  v.  Thompson, 
4  Cush.  127;  Lee  v.  Kilburn,  3  Gray,  594;  Peabody  v.  Knapp,  153 
Mass.  242),  at  the  time  when  his  cheques  were  dishonored. 

Exceptions  overruled. 


MINOT    V.   EUSS. 

Supreme  Court  of  Massachusetts,  June,  1892.     156  Mass.  458. 

The  drawer  is  discharged  if  the  holder  takes  the  certification  of  the  bank,  rather 
than  payment ;  ^  but  not  if  the  drawer  in  his  own  behalf  gets  the  cheque  certified. 

The  case  is  stated  in  the  opinion  of  the  court. 

[Argument  not  reported.] 

Field,  C.  J.  The  first  case  is  an  appeal  from  a  judgment  rendered 
by  the  Superior  Court  for  the  defendant,  on  his  demurrer  to  the 
declaration.  The  defendant,  on  October  29,  1891,  drew  a  cheque  on 
the  Maverick  National  Bank,  payable  to  the  order  of  the  plaintiff, 
and,  being  informed  by  the  plaintiff  that  the  cheque  must  be  certified 
by  the  bank  before  it  would  be  received,  the  defendant  on  the  same 
day  presented  the  cheque  to  the  bank  for  certification,  and  the  bank 
certified  it  by  writing  on  the  face  of  the  cheque  the  following :  "  Mav- 
erick National  Bank.  Pay  only  through  Clearing-House.  J.  W. 
Work,  Cashier,    A.  C.  J.,  Paying  Teller."    After  it  was  certified,  the 

1  N.  I.  L.  §  205. 


132  certifier's  contract. 

cheque  was,  on  Saturday,  October  31,  1891,  delivered  by  the  defend- 
ant to  the  plaintiffs,  for  a  valuable  consideration.  The  declaration 
alleges  that  the  bank  stopped  payment  on  Monday  morning,  Novem- 
ber 2,  1891,  "  before  the  commencement  of  business  hours  on  said 
day,"  and  that  on  that  day  payment  was  duly  demanded  of  the  bank, 
and  notice  of  non-payment  was  duly  given  to  the  defendant. 

The  second  case  is  an  appeal  from  a  judgment  rendered  for  the 
defendants  by  the  Superior  Court,  on  an  agreed  statement  of  facts. 
On  Saturday,  October  31,  1891,  the  defendants  drew  their  cheque  on 
the  Maverick  National  Bank,  payable  to  the  order  of  the  plaintiffs, 
and  delivered  it  to  them  in  payment  of  stocks  bought  by  the  defend- 
ants of  the  plaintiffs.  The  cheque  was  received  too  late  to  be  depos- 
ited by  the  plaintiffs  for  collection  in  season  to  be  carried  to  the 
clearing-house  on  that  day,  but  during  banking  hours  on  that  day  the 
plaintiffs  presented  the  cheque  to  the  Maverick  National  Bank  for 
certification,  and  the  bank  certified  it  by  writing  or  stamping  on  its 
face  the  f ollowimg::  "  Maverick  National  Bank.    Certified.    Pay  only 

through  Clearing-House.    C.  C.  Domett,  A.  Cashier.    ^  Paying 

Teller." 

At  that  time  the  defendants  had  on  deposit  sufficient  funds  to  pay 
the  cheque,  and  the  bank  on  certification  charged  to  the  defendants' 
account  the  amount  of  the  cheque,  and  credited  it  to  a  ledger  account 
called  certified  cheques,  in  accordance  with  their  uniform  custom. 
After  certification,  the  plaintiffs,  on  the  same  day,  deposited  the 
cheque  in  the  Hamilton  National  Bank  for  collection.  It  is  agreed 
that  if  the  cheque  had  been  presented  for  payment  on  Saturday,  in 
banking  hours,  it  would  have  been  paid ;  but  the  Maverick  National 
Bank  transacted  no  business  after  Saturday,  and  on  Sunday  the 
Comptroller  of  the  Currency  placed  a  national  bank  examiner  in 
charge,  and  the  bank  was  put  into  the  hands  of  a  receiver.  The 
clearing-house  on  November  2  refused  to  receive  cheques  on  the 
Maverick  National  Bank,  and  the  cheque  was  on  that  day  duly  pre- 
sented for  payment,  and  due  notice  of  non-payment  was  given  to  the 
defendants. 

Each  of  the  cheques  was  in  the  ordinary  form  of  cheques  on  a  bank, 
and  was  payable  on  demand,  and  no  presentment  for  acceptance  or 
certification  was  necessary.  In  a  sense,  undoubtedly,  a  cheque  is  a 
species  of  bill  of  exchange,  and  in  a  sense  also  it  is  a  distinct  com- 
mercial instrument;  but  according  to  the  general  understanding  of 
merchants,  and  according  to  our  statutes,  these  instruments  were 
cheques,  and  not  bills  of  exchange.  "  A  cheque  is  an  order  to  pay  the 
holder  a  sum  of  money  at  the  bank,  on  presentment  of  the  cheque 
and  demand  of  the  money ;  no  previous  notice  is  necessary,  no  accept- 
ance is  required  or  expected,  it  has  no  days  of  grace.  It  is  payable  on 
presentment  and  not  before."  Bullard  v.  Randall,  1  Gray,  605,  606. 
The  duty  of  the  bank  was  to  pay  these  cheques  when  they  were 


MINOT  V.   RUSS.  133 

presented  for  payment,  if  the  drawers  had  sufficient  funds  on  deposit. 
The  bank  owed  no  duty  to  the  drawers  to  certify  the  cheques,  al- 
though it  could  certify  them  if  it  saw  fit,  at  the  request  of  either  the  ; 
drawers  or  the  holders,  and  if  it  certified  them  it  became  bound  | 
directly  to  the  holders,  or  to  the  persons  who  should  become  the 
holders.     In  either  case,  the  bank  would  charge  to  the  account  of 
the  drawer  the  amount  of  the  cheque,  because  by  certification  it  had 
become  absolutely  liable  to  pay  the  cheque  when  presented.     When 
a  cheque  payable  to  another  person  than  the  drawer  is  presented  by 
the  drawer  to  the  bank  for  certification,  the  bank  knows  that  it  has 
not  been  negotiated,  and  that  it  is  not  presented  for  payment,  but  / 
that  the  drawer  wishes  the  obligation  of  the  bank  to  pay  it  to  the) 
holder  when  it  is  negotiated,  in  addition  to  his  own  obligation.    But ' 
when  the  payee  or  holder  of  a  cheque  presents  it  for  certification,  the 
bank  knows  that  this  is  done  for  the  convenience  or  security  of  the 
holder.     The  holder  could  demand  payment  if  he  chose,  and  it  is 
only  because,  instead  of  payment,  the  holder  desires  certification, 
that  the  bank  certifies  the  cheque  instead  of  paying  it.    In  one  case 
the  bank  certifies  the  cheque  for  the  use  or  convenience  of  the  drawer, 
and  in  the  other  for  the  use  or  convenience  of  the  holder.    In  the  pres- 
ent cases  the  cheques  were  seasonably  presented  to  the  bank  for  pay- 
ment, and  on  the  facts  stated  the  defendants  would  be  liable  unless 
the  certification  discharged  them  from  liability. 

It  is  argued  that  the  certification  of  a  cheque,  whereby  the  bank  be- 
comes absolutely  liable  to  pay  it  at  any  time  on  demand,  discharges 
the  drawer,  because  it  is  said  that  the  cheque  then  becomes  in  effect  a 
certificate  of  deposit ;  and  it  is  also  argued  that  the  certification  is  in 
effect  only  an  acceptance  of  a  bill  of  exchange,  and  that  if  payment  is 
duly  demanded  of  the  bank  and  refused,  and  notice  of  non-payment 
duly  given,  the  drawer  is  held.*  So  far  as  the  question  has  been  con- 
sidered, it  has  been  decided  that  the  certification  of  a  bank  cheque  is 
not,  in  all  respects,  like  the  making  of  a  certificate  of  deposit,  or  the 
acceptance  of  a  bill  of  exchange,  but  that  it  is  a  thing  sui  generis, 
and  that  the  effect  of  it  depends  upon  the  person  who,  in  his  own 
behalf,  or  for  his  own  benefit,  induces  the  bank  to  certify  the  cheque. 
The  weight  of  authority  is,  that  if  the  drawer  in  his  own  behalf,  or 
for  his  own  benefit,  gets  his  cheque  certified,  and  then  delivers  it  to 
the  payee,  the  drawer  is  not  discharged;  but  that  if  the  payee  or 
holder,  in  his  own  behalf  or  for  his  own  benefit,  gets  it  certified  in- 
stead of  getting  it  paid,  then  the  drawer  is  discharged.  Born  v. 
First  National  Bank,  123  Ind.  78;  Rounds  v.  Smith,  42  111.  245; 
Brown  v.  Leckie,  43  111.  497;  Andrews  v.  German  National  Bank, 
9  Heisk.  211;  First  National  Bank  v.  Leach,  52  N.  Y.  350;  Boyd  v. 

1  It  was  so  held  in  Bickford  r.  National  Bank,  42  111.  238,  by  analogy  to  the  bill  of 
exchange.  But  the  analogy  is  not  perfect ;  the  drawer  of  the  cheque  does  not  order 
certification ;  his  order  is  to  pay  money. 


134  certifier's  contract. 

Nasmith,  17  Ont.  40;  Essex  County  National  Bank  v.  Bank  of  Mon- 
treal, 7  Biss.  193 ;  First  National  Bank  v.  Whitman,  94  U.  S.  343, 
345;  Metropolitan  National  Bank  v.  Jones,  27  N.  E.  Eep.  533;  Con- 
tinental National  Bank  v.  Cornhauscr,  37  111.  App.  475;  National 
Commercial  Bank  v.  Miller,  77  Ala.  168;  Larsen  v.  Breene,  12  Col. 
480;  Mutual  National  Bank  v.  Eotge,  28  La.  An,  933;  Morse  on 
Banking,  §§  414,  415.  We  are  of  opinion  that  this  view  of  the  law 
rests  on  sound  reasons.  If  it  be  true  that  the  existing  methods  of 
doing  business  make  the  use  of  certified  cheques  necessary,  the  per- 
sons who  receive  them  can  always  require  them  to  be  certified  before 
delivery.  If  they  receive  them  uncertified  and  then  present  them  to 
the  bank  for  certification  instead  of  payment,  the  certification  should 
be  considered  as  discharging  the  drawer. 

It  may  also  be  said,  that  in  the  second  case  the  certification 
amounted  to  an  extension  of  the  time  of  payment  at  the  request  of 
the  payees,  without  the  consent  of  the  drawers.  Before  the  certifica- 
tion the  drawers  could  have  requested  the  payees  to  present  the  cheque 
for  payment  on  Saturday,  or  could  themselves  have  drawn  out  the 
money  and  paid  the  cheque.  After  certification  the  amount  of  the 
cheque  no  longer  stood  to  the  credit  of  the  drawers,  and  the  payees 
had  accepted  an  obligation  of  the  bank  to  pay  only  through  the 
clearing-house,  which  could  not  happen  before  the  following  Monday. 
The  result  is  that  in  the  first  case  the  judgment  is  reversed,  and  the 
demurrer  overruled,  and  in  the  second  case  the  judgment  is  affirmed. 


,  THE   IRVING   BANK   v.   WETHERALD. 

Supreme  Court  of  New  York,  March,  1867.     36  N.  Y.  335. 

The  certifier  does  not  conclusively  admit  funds  of  the  drawer,  and  if  certification 
has  been  made  in  mistake  of  funds,  it  may  be  withdrawn,  provided  the  holder  will 
suffer  no  prejudice  thereby ;  notes  payable  at  bank  may  be  certified. 

Action  by  the  holder  against  the  indorsers  of  a  negotiable  promis- 
sory note.  One  Wilson  made  the  note,  payable  to  himself  at  the 
Irving  Bank,  and  indorsed  it  to  the  defendants,  Wetherald  and 
Young,  who  indorsed  it  to  the  Seventh  Ward  Bank.  At  maturity, 
the  note  was  presented  to  the  plaintiff  bank  by  the  Seventh  Ward 
Bank,  and  the  plaintiff  certified  it,  by  its  teller,  and  the  Seventh  Ward 
Bank  marked  it  "  paid." 

Later  on  the  same  day  the  plaintiff  bank  discovered  that  Wilson 
had  no  funds  on  deposit,  and  immediately  notified  the  Seventh  Ward 
Bank,  requesting  that  the  certification  might  be  withdrawn.  This 
the  Seventh  Bank  refused,  and  the  plaintiff,  having  paid  the  Seventh 
Ward  Bank  the  full  amount  of  the  note,  on  the  same  day,  presented 


THE   IRVING   BANK   V.   WETHEEALD.  135 

it  at  the  counter  of  the  Irving  Bank,  protested  it  for  non-payment, 
and  gave  notice  of  dishonor  to  the  defendants. 

Judgment  was  given  for  the  defendants,  which  was  reversed  at  the 
General  Term,  and  the  defendants  appealed,  agreeing  that  if  the 
reversal  was  affirmed,  judgment  absolute  might  be  entered  against 
them. 

[Argument  not  reported.] 

Hunt,  J.  Both  the  judge  at  the  circuit,  and  the  General  Term 
were  of  the  opinion,  that  the  notice  by  the  plaintiffs  to  the  Seventh 
Ward  Bank,  of  the  mistake  in  certifying  Wilson's  cheque  ^  to  be  good, 
before  any  steps  had  been  taken,  or  any  measures  omitted  by  the 
Seventh  Ward  Bank,  and  while  there  was  still  time  to  fix  all  the 
parties  upon  the  note,  relieved  the  plaintiffs  from  their  liability  on 
the  certificate.  In  this  opinion  I  concur.  Such  a  certificate  possesses 
no  extraordinary  or  hidden  power.  It  should  impose  no  greater 
liability  than  its  terms  fairly  require.  Divested  of  all  teclmical 
terms,  the  transaction  in  question  was  simply  this:  The  Seventh 
Ward  Bank  present  for  payment  at  the  Irving  Bank,  where  it  is 
made  payable,  the  note  of  Morris  Wilson.  The  making  the  note  pay- 
able there  was  a  warrant  from  the  maker  to  the  latter  bank,  to  pay 
it  from  his  funds,  and  charge  it  to  him.^  When  the  note  is  pre- 
sented, the  teller  of  the  paying  bank  informs  the  presenter  that  the 
note  is  good,  in  other  words,  that  the  maker  has  the  funds  in  the 
bank  to  meet  it.  This  information  may  be  communicated  verl^ally, 
by  letter  or  by  a  memorandum  on  the  note,  ordinarily  called  a  certifi- 
cate. If  the  note  were  presented  by  an  individual,  the  money  would 
ordinarily  be  paid  to  him  in  satisfaction,  and  the  note  left  with  the 
paying  bank.  In  the  case  of  a  bank,  the  note  is  taken  back  by  the 
party  owning  it,  to  be  returned  the  next  day  in  the  settlement  of 
exchanges,  as  an  item  of  credit  in  its  favor,  and  against  the  certifying 
bank.  This  is  the  usual  course  of  business  in  the  city  of  Xew  York. 
The  correctness  of  this  certificate  is  a  matter  which  the  certifying 
bank  has  the  means  of  knowing,  and  is  bound  to  state  correctly. 
If  the  presenting  bank  relies  upon  its  accuracy,  and  fails  to  charge 
the  indorsers  as  upon  non-payment  on  presentation,  the  certifying 
bank  is  estopped  from  denying  the  truth  of  its  statement.  Having 
asserted,  of  its  own  knowledge,  that  the  maker  had  funds  in  its  bank 
to  meet  the  note,  and  the  presenting  bank,  having  omitted  to  charge 
its  indorsers  in  reliance  upon  such  statement,  the  certifying  bank  will 
not  be  permitted  to  go  behind  its  omti  statements.  The  teller  of  the 
bank  is  the  proper  officer  to  make  this  statement,^  and  his  statement 

1  A  slip  for  note.  2  n.  I.  L.  §  104. 

8  See  ]\Iussey  v.  Eagle  Bank,  9  Met.  306,  contra. 


136  CERTinER's  CONTRACT. 

binds  the  bank,  whether  accurate  or  erroneous.  These  principles  are 
established  in  Mead  v.  The  Merchants'  Bank  of  Albany,  25  N.  Y. 
143,  and  in  Farmers'  and  Mechanics'  Bank  of  Kent  County  v. 
Butchers'  and  Drovers'  Bank,  16  N.  Y.  125. 

In  the  present  case  the  Irving  Bank  discovered  its  error,  in  stating 
that  it  had  funds  for  the  payment  of  Wilson's  note,  in  sufficient  time 
to  prevent  any  loss  in  consequence  of  the  error.  It  immediately 
notified  the  Seventh  Ward  Bank  of  the  error,  and  in  time  to  enable  it 
to  make  a  re-presentment,  if  necessary,  and  to  charge  the  indorsers. 
No  damage,  therefore,  could  accrue  to  the  latter  bank  from  the  erro- 
neous information.  They  were  bound  to  accept  and  to  act  upon  the 
corrected  information,  if  there  were  time  and  opportunity  so  to  do. 
I  agree  with  the  courts  below  that  the  plaintiffs  might  have  stopped 
at  that  point,  and  there  would  have  been  no  liability  on  their  part  to 
the  Seventh  Ward  Bank. 

That  bank  went  further,  however,  and,  upon  the  refusal  of  the 
Seventh  Ward  Bank  to  cancel  their  certificate,  paid  to  that  bank  the 
amount  of  the  note,  re-presented  it  at  their  own  counter,  and  gave 
notice  of  non-payment  to  the  defendants  as  indorsers  thereof.  This 
the  judge,  at  Special  Term,  held  to  amount,  in  law,  to  a  payment  of 
the  note.  The  General  Term  held  otherwise,  and  reversed  his  judg- 
ment. It  was  agreed  by  the  judge  at  Special  Term,  that  the  certifi- 
cate of  the  paying  teller  was  not  a  payment  of  the  note.  In  this  he 
was  no  doubt  correct.  It  has  also  been  held,  and  correctly,  that  the 
stamping  a  note  as  "  paid,"  or  marking  it  with  a  cancelling  hammer, 
does  not  constitute  a  payment.  Scott  v.  Betts,  Lalor  Sup.  363  and 
note;   Watervliet  Bank  v.  Denio,  608. 

That  the  advance  of  the  amount  of  the  note,  by  the  plaintiff,  to  the 
Seventh  Ward  Bank,  was  made  to  relieve  them  from  an  apprehended 
liability  on  their  certificate,  and  was  not  intended  by  them  to  be  in 
discharge  of  the  note,  is  obvious  from  the  immediate  re-presentment 
of  the  note  for  payment,  and  notice  to  the  indorsers  that  the  same 
had  not  been  paid.  There  could  have  been  no  other  purpose  in  this 
than  to  charge  the  parties  to  an  existing  note.  So,  if  they  had  in- 
tended a  payment  and  discharge  of  the  note,  they  would  have  allowed 
its  return  in  the  exchanges  of  the  day  following,  in  the  usual  course 
of  business,  instead  of  making  a  special  payment  of  the  same.  The 
judge  has  not  found,  as  a  fact,  that  the  note  was  intended  to  be  paid 
by  the  Irving  Bank,  or  that  it  was  paid  by  them.  He  could  not  have 
so  found  upon  the  testimony,  with  propriety.  He  simply  finds  that 
the  plaintiff  paid  "  the  amount  of  the  note  "  to  the  Seventh  Ward 
Bank,  and  he  holds,  as  a  legal  result,  that  the  advance  of  the  money, 
under  the  circumstances  stated,  operated  to  discharge  and  cancel  the 
note.  In  this  conclusion  I  think  he  erred.  The  plaintiffs  took  the 
note  as  a  purchaser,  and  acquired  the  rights  of  a  holder.  See  Water- 
vliet Bank  v.  White,  1  Denio,  608.     In  that  case  the  Watervliet 


FLOUK  CITY  NATIONAL  BANK  V.  TRADERS'   NATIONAL  BANK.     137 

Bank,  at  whose  counter  the  note  was  made  payable,  received  it  from 
the  holder  for  collection,  and,  having  an  account  with  the  maker, 
which,  however,  was  not  good  for  the  amount,  charged  it  to  him  and 
paid  it  to  the  holder,  at  the  same  time  placing  upon  it  a  cancelling 
mark.  By  the  practice  of  the  bank  this  mark  only  denoted  that  the 
note  was  charged.  In  a  suit  on  the  note  by  the  bank,  as  indorsee 
against  the  maker,  it  was  held  that  the  bank  held  it  with  the  rights 
of  a  purchaser,  and  could  maintain  the  action. 

In  the  present  case  the  plaintiffs  feared  a  liability  to  the  Seventh 
Ward  Bank,  by  reason  of  their  mistaken  certificate  of  the  goodness 
of  the  note.  They  advanced  to  that  bank  its  amount,  for  the  purpose 
of  re-presenting  it  for  payment,  notifying  the  indorsers,  and  holding 
it  as  an  existing  security.  The  defendants  are  indorsers  duly  charged. 
They  received,  themselves,  the  amount  of  the  note  upon  its  discount. 
It  has  never  been  paid,  and  is  now  an  available  security  in  the  hands 
of  the  plaintiffs. 

The  order  of  the  General  Term  should  be  affirmed,  and  judgment 
absolute  ordered  in  favor  of  the  plaintiffs  for  the  amount  of  the  note 
and  interest. 

All  concur.  Judgment  absolute. 


THE  FLOUE  CITY  NATIONAL  BANK  v.  THE  TRADERS' 
NATIONAL   BANK. 

Supreme  Court  of  New  York,  January,  1885.     35  Hun,  241. 

So,  by  custom,  an  acceptance  payable  at  a  bank  may  be  certified.  Making  a  note  or 
acceptance  payable  at  bank,  is  equivalent  to  an  order  to  the  bank  to  pay  on  behalf  of 
the  maker  or  acceptor.^ 

Action  to  recover  a  balance  alleged  to  be  owed  to  the  plaintiff  by 
the  defendant.  The  defendant  set  up  in  its  answer,  as  a  counter- 
claim, an  acceptance,  payable  at  the  plaintiff  bank,  and  certified  by  it. 
Judgment  for  the  plaintiff  for  the  full  amount  of  its  claim ;  defend- 
ant appealed. 

The  facts  further  appear  in  the  opinion. 

[Argument  reported.] 

Barker,  J.  The  plaintiff  and  defendant  in  the  regular  course  of 
banking  business,  had  mutual  accounts,  called  by  bankers  an  ex- 
change account,  which  was  balanced  each  day,  and  such  balance  paid 
the  next  morning  in  cash  or  by  draft  on  New  York,  at  the  option 
of  the  debtor  bank.  Each  of  these  banks  kept  a  similar  account  with 
the  City  Bank  of  Rochester,  but  as  between  the  defendant  and  the 
City  Bank,  the  balance  was  paid  at  the  close  of  each  day's  transac- 

»  Cf.  N.  I.  L.  §  104. 


138  certifiek's  contract. 

tions.  It  was  the  custom  of  these  banks,  in  dealing  with  each  other, 
^when  one  held  a  cheque,  note,  or  acceptance,  payable  at  one  of  the 
other  banks,  to  present  it  for  payment  at  such  bank  on  the  day  it  be- 
came due,  and  instead  of  receiving  payment  thereon,  have  it  certified 
in  the  form  hereafter  mentioned  by  the  bank  at  which  it  was  payable, 
and  for  the  bank  presenting  it  to  hold  the  same  until  the  balance 
of  the  current  day's  business  was  paid  and  the  same  was  entered 
in  the  exchange  account  at  the  time  of  the  certification.  The  case 
states  that  a  similar  custom  prevailed  among  all  the  banks  in  the 
city  of  Rochester. 

The  City  Bank  held  a  draft  drawn  by  a  Boston  house  on  D.  Gordon, 
of  Eochester,  payable  to  the  order  of  its  cashier,  which  was  accepted 
by  the  drawee  on  the  fifteenth  day  of  December,  and  by  him  made 
payable  at  the  plaintiff's  bank,  which  fell  due  on  the  nineteenth 
of  December.  This  draft  was  on  that  day  presented  by  the  City 
Bank  to  the  plaintiff's  bank  for  payment,  and  the  teller  indorsed 
thereon  the  customary  certification,  which  was  in  the  following  words : 
"  Certified :  J.  Thompson,  Teller,  Flour  City  Bank,"  and  returned 
the  draft  to  the  City  Bank  and  charged  the  acceptor's  account  with 
the  amount  of  the  same.  On  the  same  day  there  was  a  balance  due 
on  the  daily  exchange  account  to  the  Traders'  Bank,  from  the  City 
Bank,  of  $8000.  Such  balance  was  paid  by  the  cashier  of  the  City 
Bank  during  the  business  hours  on  that  day.  And  among  other 
things,  Gordon's  acceptance,  as  certified,  was  taken  by  the  Traders' 
Bank  in  payment.  On  balancing  the  exchange  account  of  the  same 
day  between  the  Flour  City  Bank  and  the  City  Bank  there  was  due 
to  the  former  from  the  latter  more  than  $800,  and  there  was  a  much 
larger  sum  due  from  the  City  Bank  to  the  Flour  City  Bank  on  the 
previous  day's  balance  of  the  same  account.  There  was  due  the 
Flour  City  Bank  from  the  defendant,  the  Traders'  Bank,  at  the  end 
of  the  same  day's  business,  as  the  balance  of  the  exchange  account 
between  them,  more  than  $800,  and  the  next  morning  the  defendant 
offered  Gordon's  acceptance,  as  certified,  to  the  Flour  City  Bank 
toward  the  payment  of  such  balance,  which  was  refused  and  returned 
to  the  defendant.  This  action  is  to  recover  such  balance  from  the 
defendant. 

The  defendant  sets  up  in  its  answer  Gordon's  acceptance,  as 
certified  by  the  plaintiff,  as  a  counter-claim.  The  City  Bank  did  not 
open  for  the  transaction  of  business  after  it  closed  on  the  nineteenth, 
and  it  was  then  insolvent,  and  the  balance  due  by  it  to  the  plaintiff, 
as  before  mentioned,  remains  unpaid. 

The  act  of  the  plaintiff  in  certifying  Gordon's  acceptance,  and 
charging  the  amount  to  his  account,  was  in  legal  effect  a  payment, 
and  discharged  the  acceptor  and  drawers  and  the  bank  became  a 
debtor  to  the  holder  for  the  amount  of  the  same.^     By  the  law 

J  N.  I.  L.  §  205. 


FLOUR   CITY  NATIONAL   BANK   V.  TRADERS'  NATIONAL   BANK.     139 

merchant,  the  certificate  of  a  bank  indorsed  on  a  draft  made  payable 
at  its  counter,  that  the  same  is  good  is  equivalent  to  an  acceptance 
by  the  bank.^  It  implies  that  the  acceptor  has  funds  in  the  bank 
sufficient  to  pay  the  same,  and  that  they  are  intended  to  be  used 
for  that  purpose,  and  that  the  bank  is  authorized  to  make  the  appli- 
cation. It  is  an  undertaking  on  the  part  of  the  bank  that  it  will 
hold  such  funds  for  the  use  of  the  holder  of  the  paper  and  pay  them 
over  to  him  on  return  of  the  draft.  On  these  propositions,  as  thus 
stated,  there  is  no  disagreement  between  the  counsel  for  the  respec- 
tive parties. 

The  Special  Term  held  that  the  bank's  obligation,  assumed  on 
making  the  certificate,  was  not  negotiable  in  the  sense  of  that  term, 
and  that  its  promise  was  past  due  when  the  draft  and  the  certificate 
thereof  was  transferred  by  the  City  Bank  to  the  defendant. 

Accepting  these  propositions  as  sound  law,  the  legal  conclusions 
reached  by  the  decision  of  the  Special  Term  would  be  correct  that 
the  defendant  received  the  draft  subject  to  the  offsets  and  counter- 
claim existing  in  the  plaintiff''s  favor  at  the  time  of  the  transfer,  as 
between  it  and  the  City  Bank.  In  these  views  of  the  learned  judge 
we  are  unable  to  concur;  on  the  contrary,  we  concur  with  the  de- 
fendant in  its  contention  that  the  plaintiff's  obligation,  based  on  the 
certificate,  possesses  in  a  legal  sense  all  the  features  of  negotiability, 
and  was  not  due  until  demand  of  payment  and  return  of  the  certifi- 
cate. Therefore  the  defendant  was  entitled  to  offset  its  claim  as 
holder  of  the  plaintiff's  obligation  arising  out  of  its  certification. 

In  considering  the  nature  and  extent  of  the  plaintiff's  liability 
arising  out  of  the  certification,  it  is  important  to  keep  in  mind  that 
the  liability  of  the  original  parties  to  the  draft  terminated  with  the 
making  of  the  certificate,  and  at  the  same  time  the  bank's  liability 
commenced,  which  is  an  original  one  based  upon  a  good  consideration 
moving  from  the  holder.  It  is  in  short  a  contract  partly  written  and 
partly  in  parol,  to  be  enforced  according  to  the  intent  and  meaning 
of  the  parties.  If  the  certificate  had  been  placed  upon  a  cheque 
drawn  on  the  plaintiff's  bank  by  one  of  its  customers,  there  would 
be  no  room  for  a  difference  of  opinion  as  to  the  nature  and  effect 
of  the  bank's  undertaking,  and  that  the  same  would  not  mature 
until  after  a  demand  made,  and  that  the  same  would  be  regarded  as 
a  negotiable  instrument  in  the  commercial  sense  of  the  term. 

The  certification  by  a  bank  of  an  acceptance  made  payable  at  its 
counter,  by  one  of  its  customers,  has  the  same  significance,  and  im- 
ports the  same  obligation  on  the  part  of  the  bank  as  a  like  certifica- 
tion of  a  cheque  drawn  on  it,  and  has  the  same  legal  effect.  In  one 
instance  it  is  an  admission  that  the  acceptor,  and  in  the  other  that 
the  draM-er,  has  money  on  deposit  in  the  bank,  with  which  to  pay  the 
paper  when  presented  for  payment,  and  the  bank  will  retain  the 

1  N.  I.  L.  §  204. 


140  certifier's  contract. 

money  on  deposit  to  pay  the  holder,  and  will  retain  the  same  on 
deposit  subject  to  the  order  of  the  holder.  In  the  case  of  The  Mer- 
chants' Bank  v.  State  Bank,  10  Wall.  648,  in  stating  the  bank's 
liability  based  upon  the  certification  of  a  cheque,  the  court  said:  "  It 
is  an  undertaking  that  the  cheque  is  good  then  and  shall  continue 
good,  and  this  agreement  is  as  binding  on  the  bank  as  its  notes  of 
circulation,  a  certificate  of  deposit,  payable  to  the  order  of  the  de- 
positor, or  any  other  obligation  it  can  assume.  The  object  of  certify- 
ing a  cheque,  as  regards  both  parties,  is  to  enable  the  holder  to  use 
it  as  money.  The  transferee  takes  it  with  the  same  readiness  and 
Sense  of  security  that  he  would  take  the  notes  of  the  bank.  It  is 
available  also  to  him  for  all  the  purposes  of  money.  Thus  it  con- 
tinues to  perform  its  important  functions  until,  in  the  course  of  busi- 
ness, it  goes  back  to  the  bank  for  redemption,  and  is  extinguished  by 
payment."  Prior  to  and  subsequent  to  the  decision  of  this  case,  the 
courts  of  this  State  had  given  the  same  interpretation  to  the  contract 
of  certification,  and  held  the  bank's  liability  to  pay  as  broadly  as 
stated  in  the  portion  of  the  opinion  we  have  quoted.  The  F.  and  M. 
Bank  v.  The  Butchers'  and  D.  Bank,  28  N.  Y.  428 ;  s.  c.  14  N.  Y. 
623;  Meads  v.  The  Bank  of  Albany,  25  N.  Y.  143;  2  Daniel  on 
Negotiable  Instruments,  254.  In  Meads'  case  one  of  the  instru- 
ments, certified  by  the  bank  at  which  it  was  made  payable,  was  a 
note,  and  the  other  was  a  cheque,  and  the  court  held  the  bank  alike 
liable  on  each,  and,  as  to  the  note,  the  court  remarked :  "  The  presen- 
tation of  the  note  at  the  counter  of  the  bank  on  its  maturity,  for 
payment,  was  in  the  ordinary  course  of  business,  and  so  was  the 
making  of  the  certificate  then  and  there  indorsed  by  the  teller,  cer- 
tifying that  the  same  was  good.  The  legal  effect  and  force  of  such 
certificate  was  that  the  maker  had  deposited  funds  in  the  bank  to 
meet  said  note,  and  that  the  bank  then  held  the  same  on  deposit  for 
that  purpose,  and  would  pay  the  amount  upon  request."  In  the  case 
now  here,  the  transaction  in  legal  effect  was  a  deposit  of  the  money 
by  the  acceptor  of  the  draft  with  the  bank  making  the  certificate, 
and  not  a  loan  in  the  ordinary  acceptance  of  that  term.  This  view 
of  the  transaction  is  taken  by  all  the  courts.  It  is  a  well  settled  law 
that,  where  money  is  placed  on  deposit,  the  depositor  is  not  liable  to 
an  action,  and  the  statute  of  limitations  does  not  commence  to  run 
on  his  obligation,  until  after  a  demand  of  payment  is  made  in  pur- 
suance with  the  terms  of  deposit.  And  such  is  this  case,  though  it  is 
in  the  power  of  the  owner  of  the  deposit  to  make  it  due  and  payable 
at  any  time,  by  its  own  act  of  making  the  demand.  Munger  v. 
Albany  City  Nat.  Bank,  85  N.  Y.  587. 

If  the  object  of  the  certificate  is  understood  by  both  parties  to  be 
for  the  purpose  of  enabling  the  holder  to  use  it  as  money,  and  the 
transferee  may  take  it  with  the  same  sense  of  security  as  he  could 
the  notes  of  the  bank,  it  is  inconsistent  with  such  views  as  to  the 


merchants'  bank  v.  bank  of  the  commonwealth.      141 

nature  and  effect  of  the  contract  to  say,  that  it  is  not  negotiable  and 
is  due  when  issued. 

We  have  thus  far  viewed  the  case  without  considering  what  the 
effect  of  the  custom  of  dealing  between  the  banks  has  on  the  legal 
rights  of  the  parties.  We  are  unable  to  discern  any  fact  or  circum- 
stance connected  with  the  custom  which  affects  the  legal  rights  of  the 
defendant.  If  paid  a  full  consideration  for  the  certified  draft,  and  it 
was  ignorant  of  the  circumstance  that,  on  the  day  of  the  certification, 
the  City  Bank  was  a  debtor  to  the  plaintiff,  or  that  the  balance  of 
that  day's  transaction  would  leave  the  City  Bank  a  debtor  in  a  further 
sum  to  the  Flour  City  Bank.  The  expectation  and  understanding 
on  the  part  of  the  Flour  City  Bank,  when  it  made  the  certification 
that  the  City  Bank  would  return  it  the  next  morning  to  be  used  in 
discharge  of  its  obligations,  is  not  sufficient  in  and  of  itself  to  deprive 
a  holder,  taking  title  through  the  City  Bank,  of  the  protection  which 
it  has,  arising  out  of  the  circumstance  that  it  was  not  due  and  was 
also  negotiable. 

The  defendant,  conceding  that  it  knew  the  fact  that  the  City  Bank 
paid  the  balances  against  it,  at  the  close  of  each  day's  transaction, 
to  the  plaintiff  in  certificates  of  this  character,  it  was  still  justified  in 
receiving  this  paper,  for  it  had  no  reason  to  suppose  that  the  City 
Bank  would  not,  in  some  proper  way,  discharge  all  its  obligations  to 
the  plaintiff  if  the  balance  was  found  to  be  against  it.  Suppose  that 
the  City  Bank  was  the  agent  of  the  drawer  of  the  draft  for  the  pur- 
pose of  collecting  the  same,  and  on  receiving  the  certificate  had  re- 
turned it  to  them,  can  it  be  said  that  the  plaintiff  could  offset  its 
balances  against  the  City  Bank  and  thus  deprive  the  holder  of  the 
payment  which  the  acceptor  made?  The  law,  by  placing  upon 
the  plaintiff's  obligation  the  features  of  negotiability  and  treating  the 
same  as  not  due  until  after  demand  puts  an  end  to  the  plaintiff's 
contention. 

Judgment  reversed,  new  trial  granted  with  costs  to  abide  the  event. 

Haight  and  Bradley,  JJ.,  concurred. 


MEECHANTS'  NATIONAL  BANK  v.  NATIONAL  BANK  OF 
THE  COMMONWEALTH. 

Supreme  Court  of  Massachusetts,  June,  1885.     139  Mass.  514. 

If  the  drawee  bank  pays  a  cheque  in  mistake  of  fands,  it  may  recover  back  the 
money  so  paid,  unless  it  has  been  negligent  in  making  reclamation,  and  the  holder 
has  changed  his  position. 

Contract  to  recover  $15,000,  the  amount  of  a  cheque,  dated  Sep- 
tember 3,  1883,  drawn  on  the  plaintiff  by  Benjamin  F.  Burgess  and 
Sons,  in  favor  of  the  Massachusetts  Loan  and  Trust  Company,  and 


142  certifier's  contract. 

b}'^  it  deposited,  on  September  3,  with  the  defendant.  Trial  in  this 
court,  before  C.  Allen,  J.,  who  reported  the  case  for  the  considera- 
tion of  the  full  court,  in  substance  as  follows : 

The  plaintiff  and  defendant  banks  are  members  of  an  unincor- 
porated association  called  the  Boston  Clearing-House  Association, 
whose  rules  and  course  of  business  are  the  same  as  set  forth  in  the 
cases  of  Merchants'  Bank  v.  Eagle  Bank,  101  Mass.  281,  and  Ex- 
change Bank  v.  Bank  of  North  America,  132  Mass.  147,  to  which 
reference  is  to  be  made. 

Benjamin  F.  Burgess  and  Sons  were  depositors  with  the  plaintiff 
bank  and  kept  a  bank  account  with  it,  and  Benjamin  P.  Burgess  was 
one  of  the  plaintiff's  directors.  They  were  indebted  to  the  plaintiff 
in  the  sum  of  $83,000  on  three  notes,  payable  on  demand,  with  a 
pledge  of  warehouse  receipts  for  twelve  hundred  and  seventy  hogs- 
heads of  sugar  as  collateral  security,  and  in  the  further  sum  of 
$129,500  on  three  other  notes,  payable  on  demand,  with  a  pledge  of 
United  States  bonds  and  other  securities  as  collateral.  Demand  was 
made  for  the  payment  of  the  notes  for  $83,000  on  the  23d  or  24th  of 
August,  1883,  and  within  two  days  after  the  demand.  Burgess  told 
the  plaintiff's  president  that  he  had  sold  or  bargained  to  sell  two 
hundred  and  seventeen  hogsheads  of  the  sugar;  and  the  warehouse 
receipts  were  thereupon  intrusted  to  Burgess,  as  agent  of  the  bank,  to 
enable  him  to  deliver  the  sugar  so  sold,  with  the  understanding  that 
the  money  received  for  the  sugar  should  be  brought  to  the  bank  and 
applied  on  the  debt.  The  sugar  was  sold  on  August  23,  to  Nash, 
Spaulding,  and  Company,  who  gave  their  cheque  for  $7500,  dated 
September  1,  and  payable  to  Benjamin  F.  Burgess  and  Sons.  This 
cheque  was  deposited  with  the  plaintiff  by  that  firm,  on  September  1, 
to  the  credit  of  Benjamin  F.  Burgess  and  Sons,  and  the  same  was 
entered  to  their  credit  in  their  bank  account,  the  plaintiff  not  know- 
ing at  the  time,  nor  until  September  5,  that  it  came  from  the  sale  of 
the  sugar.  ... 

On  the  morning  of  September  4,  there  was  an  apparent  balance  of 
$17,145.56  to  the  credit  of  the  firm  of  Burgess  and  Sons,  the  item  of 
$7500  being  included  as  an  item  to  their  credit,  entered  on  September 
1,  as  above  stated.  During  the  forenoon  of  September  4,  three 
cheques  of  Benjamin  F.  Burgess  and  Sons,  of  $1000,  $225,  and  $200, 
respectively,  were  paid  over  the  counter  by  the  plaintiff.  On  the  same 
day  the  cheque  in  controversy  in  this  action  came  from  the  defendant 
bank  to  the  plaintiff  bank  through  the  clearing-house,  where  it  has 
been  provisionally  paid,  in  accordance  with  the  usual  course  of  busi- 
ness in  the  clearing-house.  This  cheque  was  received  by  the  plaintiff 
at  about  noon,  and  was  in  the  first  instance  entered  to  the  debit  of 
Benjamin  F.  Burgess  and  Sons  on  the  plaintiff's  books ;  but  at  about 
one  o'clock  the  president  of  the  plaintiff  received  [a  communication 
which]  led  him  to  think  that  Burgess  and  Sons  were  in  financial 


MEECHANTS'   BANK   V.   BANK   OF  THE   COMMONWEALTH.         143 

trouble,  and  he  then  discovered  that  no  payment  from  the  avails  of 
the  sugar  had  been  made  upon  the  indebtedness  for  which  the  sugar 
had  been  pledged  as  collateral  security.  He  looked  at  the  condition 
of  their  bank  account,  and  immediately  gave  directions  to  send  back 
the  cheque  of  $15,000  to  the  defendant,  and  to  demand  the  repayment 
of  the  money,  as  the  cheque  was  not  good ;  and  the  entry  of  it  in  the 
account  of  Burgess  and  Sons  was  erased.  .  .  . 

Where  there  is  not  enough  money  on  deposit  to  pay  a  cheque  in 
full,  the  ordinary  custom  is  to  return  the  cheque  as  not  good. 

The  plaintiff  held  no  surplus  of  security  upon  either  branch  of  the 
indebtedness  of  Burgess  and  Sons  which  could  be  applied  to  make 
good  the  $7500.  The  president  of  the  plaintiff  bank,  who  was  the 
only  principal  officer  testifying,  and  who  gave  the  directions  for 
the  return  of  the  cheque,  had  no  knowledge  on  September  4  that  the 
sugar  pledged  as  collateral  security  was  not  sufficient  to  secure  all  of 
the  notes  of  Burgess  and  Sons  held  by  the  bank  for  which  the  col- 
lateral was  given. 


[Argument  not  reported.] 

Devens,  J.  The  rules  and  course  of  business  of  the  unincorporated 
association  called  the  Boston  Clearing-House  Association  have  been 
so  set  forth  in  the  recent  decisions  of  this  court  that  they  do  not 
require  to  be  here  fully  restated.  They  were  adopted  solely  for  the 
purpose  of  facilitating  exchanges  and  the  adjustment  of  accounts 
between  the  banks.  By  a  contract  between  them,  an  association  is 
formed,  which  is  their  common  banker.  To  this  association  each 
bank,  which  is  indebted  by  reason  that  more  cheques,  etc.,  are  pre- 
sented, as  drawn  upon  it,  than  it  presents,  as  drawn  against  the  other 
banks  who  are  members,  pays  the  balance  found  due  from  it  to 
the  association,  while  each  bank  that  shows  a  balance  in  its  favor 
receives  from  the  association  the  amount  by  its  cheque.  Mistakes 
that  may  be  made  in  this  computation,  because  cheques  are  not  good, 
are  not  settled  by  the  association,  but  between  the  banks  themselves ; 
and  such  cheques  are  to  be  returned  by  the  banks  receiving  the  same 
to  the  banks  from  which  they  are  received  as  soon  as  it  shall  be  found 
that  they  are  not  good,  "  and  in  no  case  are  they  to  be  retained  after 
one  o'clock."  To  the  regulations  of  this  association,  the  customers 
of  the  banks  are  not  parties,  and,  whatsoever  effect  is  to  be  given  to 
them  as  between  the  banks,  their  customers  are  not  in  a  situation  to 
claim  the  benefit  of  them,  nor  are  they  liable  to  be  injuriously  affected 
by  them.  Merchants'  Bank  v.  Eagle  Bank,  101  Mass.  281 ;  Bank 
of  North  America  v.  Bangs,  106  Mass.  441 ;  Manufacturers'  Bank 
V.  Thompson,  129  Mass.  438;  Exchange  Bank  v.  Bank  of  North 
America,  132  Mass.  147.    By  these  regulations,  it  was,  in  substance, 


144  certifier's  contract. 

agreed  in  the  case  at  bar,  that,  if  Burgess  and  Sons  had  to  their  credit 
a  sum  sufficient  to  meet  the  cheque  for  which  they  were  entitled  to 
draw,  the  amount  of  which  is  here  demanded,  the  provisional  allow- 
ance of  it  at  the  clearing-house  should  stand ;  but  that,  if  it  appeared 
on  investigation  that  they  were  not  entitled  to  draw  for  any  such 
sum,  the  cheque  should  not  be  retained  by  the  plaintiff  bank  after  one 
o'clock.  The  bank  which  had  sent  the  cheque  to  the  clearing-house 
would  then  be  notified  that  it  was  not  good,  and  that  repayment  of 
the  amount  of  it  would  be  expected  by  the  bank  on  which  it  was 
drawn. 

The  cheque  was  not  returned  to  the  defendant  bank  until  after  one 
o'clock.  It  is  not  disputed  by  the  plaintiff,  that  if,  in  consequence  of 
this,  the  defendant  had  changed  its  position,  as  if  it  had  paid  over 
the  amount  of  the  cheque  to  the  owner,  who  had  deposited  it  with  the 
bank  for  collection,  the  bank  should  not  suffer ;  but  it  contends  that 
when,  by  a  mistake  as  to  a  matter  of  fact,  it  has  delayed  the  return 
of  the  cheque  until  after  one  o'clock,  this  cannot  be  taken  advantage 
of  by  the  bank  on  behalf  of  the  owner  of  the  cheque,  there  having 
been  no  change  in  its  position  in  the  interval  between  one  o'clock  and 
the  actual  return  of  the  cheque. 

The  case  of  Merchants'  Bank  v.  Eagle  Bank,  uhi  supra,  goes  far  to 
decide  the  case  at  bar.  It  was  there  held  that  the  manifest  purpose 
of  the  provision  in  the  clearing-house  rules  was  to  fix  a  time  at  which 
the  creditor  bank  was  authorized  to  treat  the  cheque  as  paid,  and  so 
deal  with  it  in  its  relations  with  others.  The  court  declined  to  adopt 
the  theory  that  a  failure  to  return  a  bad  cheque  before  one  o'clock  to 
the  bank  sending  it  through  the  clearing-house  would  work  a  forfeit- 
ure of  the  right  to  return  it,  or,  of  itself,  constitute  a  bar  to  an  action 
to  recover  its  amount ;  and  held  that  a  failure  to  comply  with  the  stip- 
ulation as  to  returning  the  cheque  would  leave  the  parties  in  the  same 
position  as  when  a  payment  is  made  under  a  mistake  of  fact  in  the 
ordinary  way.  This  case  has  been  since  cited  with  approval.  Manu- 
facturers' Bank  v.  Thompson,  and  Exchange  Bank  v.  Bank  of  North 
America,  uhi  supra. 

In  Preston  v.  Canadian  Bank  of  Commerce,  23  Fed.  Rep.  179,  it 
was  held  otherwise,  and  there  decided  that  a  mistake  discovered  after 
half-past  one  o'clock,  which  was  there  the  hour  for  returning  cheques, 
could  not  be  corrected  by  the  bank  making  it,  nor  the  cheque  then 
returned.  It  is  said  by  Judge  Blodgett,  referring  to  the  case  of  Mer- 
chants' Bank  v.  Eagle  Bank,  uhi  supra,  "  The  Massachusetts  court 
puts  its  decision  on  the  ground  that  you  may  correct  a  mistake  of  this 
kind  at  any  time  after  it  is  discovered,  if  it  places  the  party  to  whom 
the  cheque  is  returned  in  no  worse  condition  than  it  would  have  been 
in  if  it  had  been  returned  within  the  stipulated  time ;  thus  overlook- 
ing the  rule  that  parties  may  agree  that  they  shall  not  have  the  right 
to  correct  mistakes  unless  done  within  a  limited  time."    But  we  have 


merchants'  bank  v.  bank  of  the  commonwealth.       145 

not  overlooked  the  right  of  parties  to  make  such  agreement  as  they 
choose.  The  question  is  as  to  the  interpretation  of  the  rule  which 
they,  as  members  of  the  clearing-house,  have  adopted. 

The  rule  is,  "  Whenever  cheques  which  are  not  good  are  sent 
through  the  clearing-house,  they  shall  be  returned  by  the  banks  re- 
ceiving the  same  to  the  banks  from  which  they  were  received  as  soon 
as  it  shall  be  found  that  said  cheques  are  not  good:  and  in  no  case 
shall  they  be  retained  after  one  o'clock."  If  it  were  intended  that 
mistakes  should  never  be  corrected  unless  discovered  by  one  o'clock, 
this  should  in  terms  explicitly  appear.  As  it  does  not,  it  seems  to  us 
the  more  correct  interpretation  to  hold  that  the  rule  authorizes  the 
bank  receiving  the  cheque,  after  one  o'clock  arrives  and  the  cheque  is 
not  returned,  to  treat  it  in  all  transactions  as  if  it  were  good.  If, 
therefore,  the  bank  changes  its  position,  it  will  suffer  no  loss  by 
reason  of  it.  On  the  other  hand,  if  the  mistake  is  discovered  after 
one  o'clock,  and  the  bank  receiving  the  cheque  has  not  changed  its 
position  by  reason  of  the  expiration  of  the  time,  it  should  rectify 
the  mistake  when  reasonable  care  has  been  exercised  by  the  bank  on 
which  it  was  drawn. 

In  the  case  at  bar  there  was  no  change  of  circumstances,  after  the 
time  when  the  defendant  had  a  right  to  treat  the  cheque  as  paid  and 
before  it  was  returned,  which  would  in  any  way  subject  the  defendant 
to  loss,  or  render  it  unjust  for  the  plaintiff  to  recover.  The  fact  that 
the  defendant  gave  credit  to  its  depositor  in  this  interval  did  not 
make  the  defendant  liable  to  such  depositor  when  a  mistake  was  dis- 
covered which  showed  it  to  have  been  erroneously  done. 

The  mistake  made  by  the  plaintiff  was  such  as  would  bring  the 
case  within  the  rule  which  has  heretofore  been  held  applicable  on 
this  subject.  There  was  no  carelessness,  as  in  Boylston  National 
Bank  v.  Richardson,  101  Mass.  287,  where  the  paying  teller  neglected 
to  examine  the  account  of  the  drawer  of  a  cheque,  which  account  had 
not  varied  materially  for  a  month,  and  which  had  not  been  sufficient 
to  meet  the  cheque  for  three  months,  and  paid  it  without  examina- 
tion. Such  a  transaction  showed  no  mistake  of  fact,  in  any  legal 
sense,  but  laches  simply.  The  teller  in  that  case  was  not  misled  in 
any  way,  and  had  no  reason  to  suppose  the  account  of  the  depositor 
was  otherwise  than  as  it  actually  appeared. 

The  mistake  in  the  case  at  bar  was,  that  the  account  of  Burgess  and 
Sons  with  the  plaintiff  bank  was  really  different  from  that  which 
appeared  on  its  books,  and  this  was  effected  by  the  wrongful  act  of 
Burgess.  He  had  received  a  cheque  for  $7500  for  property  belonging 
in  specie  to  the  bank,  which  it  was  his  duty  to  have  delivered  to  the 
bank  as  its  property.  Instead  of  doing  this,  he  deposited  the  cheque 
as  the  property  of  Burgess  and  Sons,  and  by  that  act  obtained  for 
them  a  credit  on  the  books  of  the  plaintiff  bank  to  which  they  were 

10 


146  certifier's  contract. 

not  entitled.  Against  the  false  balance  thus  produced  by  depositing 
the  money  of  the  bank  as  if  it  were  their  own,  Burgess  and  Sons 
fraudulently  drew  the  cheque  in  controversy,  and  it  led  to  the  reten- 
tion of  the  cheque  until  a  few  minutes  after  one  o'clock. 

But  if  the  money  paid  under  a  mistake  of  fact  may  be  recovered, 
and  if  the  credit  to  which  the  defendant  was  entitled  at  one  o'clock 
might  be  recalled  on  discovery  of  such  a  mistake,  it  is  urged  that  the 
plaintiff  should  then  be  able  to  show  mistake,  misapprehension,  or 
ignorance  of  some  definite  and  material  fact  which  directly  affected 
the  obligation  of  the  plaintiff  to  pay  the  cheque ;  and  that  the  credit 
was  sought  to  be  recalled  under  a  vague  apprehension  of  insecurity 
produced  by  reports  of  the  embarrassment  of  Burgess  and  Sons. 
This,  it  is  contended,  is  not  sufficient,  even  if  subsequent  investiga- 
tion has  shown  that  the  apparent  credit  of  Burgess  and  Sons  with  the 
plaintiff  bank  was  fraudulently  obtained  in  the  mode  above  stated. 
It  appears  by  the  report  that  the  president  of  the  plaintiff  bank,  being 
led  to  think  that  Burgess  and  Sons  were  in  financial  trouble,  then 
discovered  that  the  avails  of  the  sugar  confided  to  Burgess  to  sell  had 
not  been  received  by  the  bank  upon  the  indebtedness  for  which  it  was 
pledged  as  collateral  security;  and,  looking  at  the  condition  of  Bur- 
gess and  Sons'  bank  account,  he  directed  the  return  of  the  cheque. 

But  even  if,  at  the  time  of  the  return  of  the  cheque,  the  president 
could  not  have  stated  the  exact  way  in  which  the  mistake  was  made, 
when  subsequently  investigated,  it  is  shown  to  have  arisen  from  the 
same  transaction  to  which  he  then  attributed  it,  and  which  caused 
him  to  direct  the  return  of  the  cheque,  namely,  the  sale  of  the  sugar 
confided  to  Burgess.  He  supposed  that  the  proceeds  of  the  sugar  had 
not  been  paid  into  the  bank  at  all,  while  in  fact  they  had  been  paid 
in,  but  in  such  a  manner  as  to  obtain,  by  spoken  or  acted  falsehood,  a 
wrongful  credit  in  favor  of  Burgess  and  Sons. 

Nor  can  it  be  seen  why  the  plaintiff  bank  might  not  have  returned 
the  cheque  the  next  day,  if  there  had  been  no  change  in  the  circum- 
stances, and  if  it  had  then  discovered,  as  it  actually  did,  the  exact 
character  of  the  mistake.  It  cannot  affect  the  plaintiff  unfavorably 
that  it  offered  to  do  so  earlier,  and  on  the  same  day  it  received  the 
cheque,  even  if  its  president  could  not  then  formally  state  the  exact 
mode  in  which  the  mistake  had  occurred. 

The  defendant  further  urges  that  there  has  been  such  laches  on  the 
part  of  the  plaintiff  bank  in  its  dealings  with  Burgess  that  it  is  not 
entitled  to  recover.  Dana  v.  Bank  of  the  Eepublic,  132  Mass.  156.  On 
August  23  or  24,  1883,  demand  was  made  upon  Burgess  for  payment 
of  demand  notes  which  were  then  deemed  to  be  amply  secured  by 
sugar  as  collateral  security.  Two  days  after  this.  Burgess  told  the 
plaintiff's  president  that  he  had  sold  or  bargained  for  the  sale  of  two 
hundred  and  seventeen  hogsheads;  and  the  warehouse  receipts  were 
delivered  to  him,  as  agent  of  the  bank,  to  enable  him  to  transfer  the 


merchants'  bank  v.  bank  of  the  commonwealth.      147 

sugar  sold,  with  the  understanding  that  the  money  received  there- 
from would  be  applied  upon  the  debt  for  which  it  was  held  as  col- 
lateral security.  A  cheque  was  received  therefor,  on  September  1, 
of  $7500,  which  was  the  one  wrongfully  deposited  by  Burgess  to  the 
credit  of  Burgess  and  Sons.  The  laches  which  the  defendant  alleges 
is  in  failing  to  look  after  the  proceeds  of  this  sugar  until  September 
4.  But  up  to  this  time  the  plaintiff  bank  had  not  supposed  Burgess 
and  Sons  to  be  in  financial  straits ;  they  had  always  been  allowed  to 
dispose  of  the  goods  pledged  by  them  as  collateral,  and  had  always 
faithfully  accounted  for  the  proceeds  of  the  same.  That  no  sus- 
picions were  in  fact  excited  until  September  4  is  quite  clear,  and  the 
circumstances  are  not  such  that  we  can  say  there  has  been  laches  on 
the  part  of  the  plaintiff  that  should  deprive  it  of  its  remedy  for  the 
mistake  into  which  it  was  led  by  Burgess's  fraud. 

At  the  trial  before  a  single  judge,  the  defendant  contended  that 
the  remedy  of  the  plaintiff,  if  any,  was  not  against  the  defendant, 
but  against  the  Massachusetts  Loan  and  Trust  Company ;  and  that  the 
plaintiff  got  the  benefit  of  the  sale  of  the  sugar  by  applying  the  pro- 
ceeds on  another  loan.  Neither  of  these  positions  is  tenable.  Where 
a  party  who  has  paid  money  is  entitled  to  recall  it,  he  may  do  so,  pro- 
vided the  agent  has  not  paid  it  over  to  the  principal,  and  that  no 
change  has  taken  place  in  his  situation  which  would  render  it  unjust 
to  him.  The  fact  that  the  agent  has  passed  the  money  in  account 
with  his  principal,  without  any  new  credit  being  given  to  the  prin- 
cipal, will  not  of  itself  be  sufficient  to  enable  the  agent  to  retain  it. 
Story  on  Agency,  §  300, 

Nor  can  the  plaintiff  obtain  any  benefit  from  the  sale  of  the  sugar 
by  Burgess,  except  by  this  action,  which,  to  the  extent  to  which  it  is 
maintained,  will  restore  to  the  plaintiff  that  which  by  Burgess's 
fraud  it  has  been  induced  to  pay  out. 

The  question  remains,  how  much  the  plaintiff  is  entitled  to  re- 
cover. By  the  course  of  dealing  between  the  banks  composing  the 
Clearing-House  Association,  when  there  is  not  enough  money  on 
deposit  to  pay  a  cheque  in  full,  the  ordinary  custom  is  to  return  it 
as  not  good.  This  custom  has  no  application  to  the  inquiry  how 
much  the  plaintiff  may  now  recover,  which  is  one  outside  of  the 
clearing-house  rules.  These  were  not  complied  with  by  the  return 
of  the  cheque  within  the  time,  and  cannot  control  in  determining 
how  much  shall  be  returned  after  payment  of  it  has  been  made.  If 
no  mistake  had  been  made,  and  the  plaintiff  had  followed  the  custom, 
it  is  true  that  it  would  have  refused  the  cheque  entirely,  and  thus 
have  kept  in  its  control  the  other  funds  of  Burgess  and  Sons  not  the 
subject  of  mistake,  which  it  might  have  applied  in  offset  to  the  other 
claims  which  it  held  against  Burgess  and  Sons.  But  the  defendant 
is  not  bound  to  indemnify  the  plaintiff  against  all  the  incidental 
consequences  of  its  mistake,  but  only  to  return  that  money  which  was 


148  certifier's  contract. 

the  subject  of  the  mistake.  So  far  as  Burgess  and  Sons  were  entitled 
to  draw,  the  defendant  has  now  a  right  to  liold.  The  fact  that,  if 
Burgess  and  Sons  had  overdrawn,  and  this  had  been  known  to  the 
phiintiff,  it  would  have  wholly  refused  the  cheque,  should  not  deprive 
the  defendant  of  that  which  it  was  the  duty  of  the  plaintiff  to  pay 
him  upon  a  cheque  properly  drawn,  when  it  has  itself  honored  the 
cheque  as  it  was  actually  drawn.  The  plaintiff  bank  was  entitled, 
if  it  saw  fit,  to  pay  the  cheque  to  the  amount  actually  due  from  it  to 
Burgess  and  Sons,  if  the  defendant  was  willing  to  accept  that  sum. 
To  this  Burgess  and  Sons  could  have  made  no  objection. 

Nor  is  the  plaintiff  here  entitled  to  recover  any  money  to  the  use 
of  Burgess  and  Sons.  It  would  do  so  if  it  recovered  the  money  for 
which  Burgess  and  Sons  had  a  right  to  draw,  even  if,  when  recovered, 
it  would  go  to  the  use  of  Burgess  and  Sons  only  by  the  payment  of 
their  other  debts  or  liabilities  to  the  plaintiff  bank. 

The  money  which  was  the  subject  of  the  mistake  was  $7500.  In 
the  forenoon  of  September  4,  and  necessarily  before  the  cheque  of 
the  defendant  could  be  treated  as  paid,  three  cheques,  together 
amounting  to  $1425,  were  drawn  from  the  deposit  of  Burgess  and 
Sons,  which  was  nominally  $17,145.46.  These  two  sums  being  de- 
ducted from  this  deposit,  there  remained  $8220.46,  for  which  Burgess 
and  Sons  had  a  right  to  draw.  The  amount  which  the  plaintiff  is 
entitled  to  recover  is  the  difference  between  this  sum  and  $15,000, 
with  interest  from  the  date  of  the  writ. 

Judgment  accordingly. 

Note.  —  As  to  the  right  to  recover  back  money  paid  under  a  mistake  of 
fact,  recent  English  authority  is  in  accord  with  the  principal  case.  Imperial 
Bank  of  Canada  v.  Bank  of  Hamilton,  1903,  A.  C.  49.  The  case,  as  stated 
in  the  opinion  by  Lord  Lindley,  was  as  follows: 

"  The  question  raised  by  this  appeal  is  whether  the  Bank  of  Hamilton  is 
entitled  to  recover  from  the  Imperial  Bank  of  Canada  a  sum  of  $195,  paid  to 
it  ill  respect  of  a  cheque  under  the  following  circumstances. 

One  Bauer  was  a  customer  of  the  Bank  of  Hamilton,  and  he  drew  a  cheque 
upon  tliat  bank  for  $5.  The  word  'five '  was  written,  and  a  considerable  space 
was  left  between  that  word  and  the  next  words  printed  on  the  cheque.  The 
cheque  was  dated  January  25,  1897,  and  on  that  day  Bauer  took  it  to  the 
Bank  of  Hamilton  and  got  it  marked  or  certified  with  the  bank's  stamp;  he 
then  took  it  away  with  him.  The  effect  of  this  marking  or  certifying  was 
examined  and  explained  by  this  Board  in  Gaden  v.  Newfoundland  Savings 
Bank,  1899,  A.  C.  281,  at  p.  285.  The  effect  was  to  give  the  cheque  addi- 
tional currency  by  showing  on  its  face  that  it  was  drawn  in  good  faith  on 
funds  sufficient  to  meet  its  payment,  and  by  adding  to  the  credit  of  Bauer, 
who  drew  it,  the  credit  of  the  Bank  of  Hamilton,  on  which  it  was  drawn. 

The  cheque  was  a  good  cheque  for  $5,  and  if  it  had  not  been  altered  the 
Bank  of  Hamilton  would  have  paid  it  as  a  matter  of  course,  and  no  difficulty 
would  have  arisen.  But  after  Bauer  had  got  it  marked  he  wrote  in  the  word 
»  hundred  '  after  the  word  '  five*.  The  cheque  then  appeared  to  be  a  certified 
cheque  for  $500.     There  can  be  no  doubt  that  the  condition  of  the  cheque 


merchants'  bank  v.  bank  of  the  commonwealth.      149 

when  certified  afforded  opportunity  for  this  fraudulent  alteration  ;  and  if  the 
principle  laid  down  in  Young  v.  Grote  (1827),  4  Bing.  253 ;  29  R.  R.  Sol', 
could  still  be  acted  upon,  the  Bank  of  Hamilton  would,  as  between  themselves 
and  an  innocent  holder  for  value,  be  estopped  from  denying  that  the  cheque 
was  a  certified  cheque  for  $500.  But  after  the  decision  of  the  House  of  Lords 
in  Scholfield  v.  Earl  of  Londesborough,  1896,  A.  C  514,  it  was  hopeless  to 
contend  that  by  the  law  of  England  the  Bank  of  Hamilton  was  not  at  liberty 
to  prove  that  the  cheque  had  been  fraudulently  altered  after  it  has  been  certi- 
fied by  the  bank.  Whether  the  French  law,  which  prevails  in  Lower  Canada, 
is  the  same  in  this  respect  as  the  law  of  this  country  and  of  Ontario  has  not 
been  determined  ;  for  the  French  law  has  no  application  to  this  case. 

Bauer  took  the  cheque  as  altered  to  the  Imperial  Bank  of  Canada,  and 
opened  an  account  with  it.  The  cheque  was  placed  to  his  credit;  he  forthwith 
drew  cheques  upon  the  account  so  opened,  and  those  cheques  were  honored 
in  the  usual  course  of  business  The  cheque  in  question  was  passed  by  the 
Imperial  Bank  of  Canada  through  the  clearing-house  at  Toronto,  and  was 
paid  by  the  Bank  of  Hamilton  on  the  morning  of  January  27,  1897,  the  fraud 
not  having  been  then  discovered. 

It  is  proved  by  the  evidence  that  certified  cheques,  apparently  in  order  and 
presented  through  the  clearing-house,  are  paid  as  a  matter  of  course,  and  that 
it  is  not  usual  with  bankers  to  turn  to  their  customers'  accounts  on  the  day 
marked  cheques  are  presented  for  payment  through  the  clearing-house  to  see 
whether  there  is  anything  wrong  before  paying  them.  It  is,  however,  usual 
to  check  the  returns  with  the  customer's  accounts  the  next  day,  and  then  to 
enter  the  cheques  paid  the  day  before.  In  conformity  with  this  practice,  the 
Bank  of  Hamilton  paid  the  cheque  on  January  27  without  looking  at  Bauer's 
account  in  their  ledger;  but  on  the  next  day,  i.  e.  January  28,  they  turned  to 
it,  and  at  once  discovered  the  fraud.  The  Bank  of  Hamilton  immediately 
gave  notice  to  the  Imperial  Bank  of  Canada  and  demanded  repayment  of 
S195,  being  the  amount  paid  by  the  Bank  of  Hamilton  in  respect  of  the 
cheque,  less  the  $5  for  which  it  was  drawn  and  certified.  This  demand  not 
having  been  complied  with,  the  present  action  was  brought  by  the  Bank  of 
Hamilton  to  recover  the  $495.  The  action  was  defended  on  three  grounds, 
namely,  1st,  because  the  Bank  of  Hamilton  was  negligent  in  marking  the 
cheque  with  the  blank  in  it;  2d,  because  the  Bank  of  Hamilton  was  negligent 
in  paying  the  forged  cheque  without  first  turning  to  Bauer's  account  ;  3d, 
because  notice  was  not  given  to  the  Imperial  Bank  of  Canada  on  January  27, 
the  day  on  which  the  cheque  was  paid. 

The  action  was  tried  by  MacMahon,  J.,  without  a  jury,  and  he  gave  judg- 
ment for  the  plaintiffs,  namely,  the  Bank  of  Hamilton.  From  this  judgment 
the  Imperial  Bank  of  Canada  appealed,  and  the  Court  of  Appeal  affirmed  the 
judgmentof  MacMahon,  J.,  but  Armour,  C.  J.,  dissented.  From  this  decision 
the  Imperial  Bank  of  Canada  again  appealed  to  the  Supreme  Court,  which 
again  affirmed  the  decision  appealed  from,  Gwynne,  J. ,  however,  dissenting. 
The  present  appeal  is  from  their  decision. 

The  learned  counsel  for  the  appellants  did  not  seriously  rely  upon  the  first 
of  the  three  grounds  of  defence,  feeling  it  to  be  untenable  after  the  decision 
in  Scholfield  v.  Earl  of  Londesborough,  1896,  A.  C.  514, ^  to  which  reference 
has  already  been  made.  They  relied  on  the  second  and  third  grounds,  on 
which  alone  there  was  any  difference  of  opinion  in  the  courts  below. 

As  regards  negligence  in  paying  the  cheque:  It  cannot  be  denied   that 

1  Post,  p.  449. 


150  certifier's  contract. 

when  the  Bank  of  Hamilton  paid  the  cheque  on  January  27,  it  had  the  means 
of  ascertaining  from  its  own  books  that  the  cheque  had  been  altered.  But 
means  of  knowledj^e  and  actual  knowledge  are  not  the  same ;  and  it  was  long 
ago  decided  in  Kelly  v.  Solari,  9  M.  &  W.  28,  that  money  honestly  paid  by 
mistake  of  facts  could  be  recovered  back,  although  the  person  paying  it  did 
not  avail  himself  of  means  of  knowledge  which  he  possessed.  This  decision 
has  always  been  acted  upon  since,  and  their  Lordships  consider  it  applicable 
to  the  present  case.  There  was  nothing  on  the  face  of  the  cheque  to  excite 
suspicion,  nor  to  lead  the  clerk  who  cashed  the  cheque  to  take  the  unusual 
course  of  referring  to  Bauer's  ledger  account  to  see  if  all  was  right  before 
cashing  it.  Moreover,  even  if  negligence  in  this  respect  could  be  imputed  to 
the  Bank  of  Hamilton,  such  negligence  did  not  induce  the  Imperial  Bank  of 
Canada  to  treat  the  cheque  as  good  and  to  give  Bauer  credit  for  its  amount. 
That  had  been  done  already.  These  were  the  reasons  which  induced  the 
courts  below  to  decide  against  the  second  ground  of  defence ;  and  their 
Lordships  have  no  hesitation  in  coming  to  the  same  conclusion. 

There  remains  the  third  ground.  .  .  . 

Tlie  prejudice  which  it  is  suggested  that  the  Imperial  Bank  of  Canada  may 
have  suffered,  from  want  of  notice  of  dishonor  on  January  27,  consists  in 
their  inability  to  take  proceedings  on  that  day  against  Bauer  for  the  fraud 
•which  he  had  committed.  But  no  one  suggests  that  Bauer  could  have  paid 
anything  if  he  had  then  been  proceeded  against.  The  bank  was  not  deprived 
of  any  of  its  rights  against  him,  nor  was  its  position  altered  by  reason  of 
notice  of  the  forgery  not  having  been  given  until  the  day  after  the  bill  was 
paid. 

The  cheque  as  drawn  and  certified,  i.  e.  for  S5,  was  never  dishonored, 
and  no  question  arises  as  to  that.  The  cheque  for  the  larger  amount  was  a 
simple  forgery ;  and  Bauer,  the  drawer  and  forger,  was  not  entitled  to  any 
notice  of  its  dishonor  by  non-payment.  See  the  Bills  of  Exchange  Act,  1882, 
s.  50,  sub-s.  2  (c).  There  were  no  indorsers  to  whom  notice  of  aishonor  had 
to  be  given.  The  law  as  to  the  necessity  of  giving  notice  of  dishonor  has 
therefore  no  application.  The  rule  laid  down  in  Cocks  v.  Masterman,  9  B. 
&  C.  902  ;  33  R.  R.  365,  and  recently  reasserted  in  even  wider  language  by 
Mathew,  J.,  in  London  and  River  Plate  Bank  v.  Bank  of  Liverpool,  189G, 
1  Q.  B.  7,  has  reference  to  negotiable  instruments,  on  the  dishonor  of  which 
notice  has  to  be  given  to  some  one,  namely,  to  some  drawer  or  indorser,  who 
•would  be  discharged  from  liability  unless  such  notice  were  given  in  proper 
time.  Their  Lordships  are  not  aware  of  any  authority  for  applying  so  strin- 
gent a  rule  to  other  cases.  Assuming  it  to  be  as  stringent  as  is  alleged  in  such 
cases  as  those  above  described,  their  Lordships  are  not  prepared  to  extend  it 
to  other  cases  where  notice  of  the  mistake  is  given  in  reasonable  time,  and  no 
loss  has  been  occasioned  by  the  delay  in  giving  it. 

Their  Lordships,  therefore,  will  humbly  advise  His  Majesty  to  dismiss  this 
appeal,  and  the  appellants  must  pay  the  costs." 

In  Cocks  V.  Masterman,  9  B.  &  C.  902,  a  bill  of  exchange  purporting  to  have 
been  accepted  by  X,  payable  at  the  plaintiffs'  bank,  was  presented  on  the  day 
of  maturity  by  the  defendant,  and  paid  by  the  plaintiffs.  On  the  following 
day  the  plaintiffs  discovered  that  the  acceptance  was  a  forgery,  and  immedi- 
ately gave  notice  to  the  defendant.  It  was  held  that  the  plaintiffs  could  not 
recover  back  the  money,  since  the  holder,  the  defendant,  was  entitled  to  know 
on  the  day  of  maturity  whether  the  bill  would  be  honored,  and  if  it  was  dis- 


merchants'  bank  v.   bank  of  the  commonwealth.   151 

honored,  was  entitled  to  give  notice  to  prior  parties  on  that  day  ;  by  the 
plaintiffs'  delay  the  defendant  has  been  deprived  of  that  right,  and  hence  was 
prejudiced.  In  London  and  River  Plate  Bank  v.  Bank  of  Liverpool,  1896, 
1  Q.  B.  7,  this  principle  was  carried  further,  and  it  was  held  that  where  an 
acceptor  had  paid  a  bill  to  a  holder  claiming  under  a  forged  indorsement,  the 
acceptor  could  not  recover  back  the  money,  if  the  holder's  position  mijiht 
possibly  have  changed  after  payment  and  before  reclamation.  In  delivering 
the  opinion  of  the  court,  Mr.  Justice  Mathew  said,  "  A  holder  of  a  bill  cannot 
possibly  fail  to  have  his  position  affected  if  there  be  any  interval  of  time 
during  which  he  holds  the  money  as  his  own,  and  if  he  is  subsequently  sought 
to  be  made  responsible  to  hand  it  back."  This  rule  is  expressly  limited  in 
Imperial  Bank  of  Canada  v.  Bank  of  Hamilton  to  those  cases  where  there  is 
loss  to  the  defendant  through  failure  to  give  notice  to  drawer  or  indorsers, 
which  failure  was  due  to  the  plaintiff's  delay  in  giving  notice  that  the  payment 
was  made  in  mistake  ;  in  all  other  cases  the  plaintiff  may  recover,  unless  he 
has  been  negligent  in  giving  notice  of  the  mistake  and  the  defendant  has 
changed  his  position.  See  Bank  of  Commerce  v.  Union  Bank,  3  Comst.  230, 
ante,  p.  121  ;  Leather  Bank  v.  Morgan,  117  U.  S.  96;  Dana  v.  Bank  of  Republic, 
132  Mass.  156;  Shepard  Lumber  Co.  v.  Eldridge,  171  Mass.  516;  Bank  of  North 
America  v.  Bangs,  106  Mass.  441.  But  qucere,  was  not  the  statement  supra  of 
Mr.  Justice  Mathew  founded  on  the  actual  custom  of  merchants  in  London? 

There  is  reason  to  believe  that  the  rule  in  Massachusetts  as  to  payments 
through  the  clearing-house,  and  the  effect  of  the  rule  of  the  clearing-house  that 
an  instrument  paid  under  a  mistake  should  not  be  retained  after  a  time  fixed 
by  the  association,  is  not  according  to  the  custom  among  banks,  and  hence 
that  it  is  not  in  accordance  with  sound  theory.  It  is  important  to  notice  in 
this  particular  the  present  rule  of  the  Boston  Clearing-House  Association,  as 
amended  since  the  decision  of  Mechanics'  Bank  v.  Bank  of  Commonwealth, 
supra  and  cases  cited.  Article  9,  sec.  6,  provides  that  "  All  cheques,  drafts, 
notes,  or  other  items  ^  sent  through  the  Clearing-House  and  found  not  good, 
.  .  shall  be  returned  directly  to  the  Bank  from  which  they  were  received, 
and  this  Bank  shall  immediately  refund  to  the  Bank  returning  the  same, 
.  .  .  the  amount  received  through  the  Clearing-House  for  said  items  thus 
returned  to  it. 

Except  on  Saturdays,  all  such  returned  items  shall  be  delivered  not  later 
than  one  o'clock,  p.  m.  ;  and  on  Saturday,  not  later  than  twelve  o'clock,  noon." 

1  Cf.  National  Exchange  Bank  v.  National  Bank  of  North  America,  132  Mass.  147, 
and  Atlas  National  Bank  v.  National  Exchange  Bank,  176  Mass.  300. 


152  drawer's  contract. 


CHAPTER  VII. 
drawer's  contract. 


DICKINS   V.   BEAL. 

Supreme  Court  of  the  United  States,  January,  1836.    10  Peters,  246. 

The  contract  of  the  drawer  of  a  bill  of  exchange  is  conditional  and  secondary ;  ^  pre- 
sumptively, he  is  entitled  to  notice  of  dishonor  but  this  presumption  may  be  overturned 
by  evidence  that  he  had  no  reasonable  grounds  to  expect  that  his  bill  would  be 
honored.'^ 

Action  by  the  holder  of  a  bill  of  exchange  against  the  drawers  and 
indorsers.    The  facts  are  stated  in  the  opinion. 

[Argument  not  reported.] 

Baldwin,  J.  Samuel  Dickins,  the  defendant,  and  Jesse  Taylor 
were  partners,  transacting  business  at  Hazelwood,  Madison  County, 
Tennessee,  which  was  the  residence  of  Dickins.  On  the  6th  of 
December,  1832,  Taylor  drew  a  bill  of  exchange  for  $1448,  on 
Wilcox  and  Feron,  New  Orleans,  in  favor  of  Dickins,  payable  on  the 
1st  of  May,  1834,  which  Dickins  indorsed  to  the  plaintiff.  On  the 
same  day,  Dickins  and  Taylor  drew  two  other  bills  on  the  former 
house,  in  favor  of  the  plaintiff ;  one  for  $2803,  payable  on  the  1st  of 
May,  the  other  for  $1590,  payable  the  1st  of  April,  1834.  The  three 
bills  were  dated  at  Hazelwood,  Madison  County,  Tennessee;  pre- 
sented to  the  drawees  on  the  3d  of  June,  1833,  for  acceptance;  which 
being  refused,  they  were  protested,  for  non-acceptance,  by  a  notary 
public ;  who,  on  the  same  day,  gave  notice  thereof  to  the  drawer  and 
indorser  of  the  first,  and  the  drawers  of  the  other  two,  by  letters  put 
into  the  post-office,  addressed  to  them  at  Hazelwood  aforesaid.  It 
was  testified  by  the  notary  that,  not  knowing  of  any  other  residence 
of  the  parties  than  that  designated  by  the  caption  of  the  bill,  he  for- 
warded the  notices  accordingly,  after  inquiring  of  persons  likely 
to  know. 

It  appeared  that  all  the  bills  were  drawn  without  funds,  or  author- 
ity to  draw ;  nor  was  any  evidence  offered  to  show  that  either  Dickins 
or  Taylor  had  any  reason  to  think  that  their  bills  on  Wilcox  and 
Feron  would  be  honored,  except  two  letters  from  Wilcox  and  Feron, 

1  N.  I.  L.  §  78.  3  Id.  §§  96,  131. 


DICKINS   V.   BEAL  153 

dated  the  1st  of  December,  1831,  addressed  to  the  cashier  of  the 
branch  Bank  of  the  United  States,  at  Nashville.  In  one  they  say: 
"  Messrs.  Dickins  and  Taylor  are  authorized  in  making  negotiations, 
to  value  on  our  house  in  New  Orleans,  for  say  $10,000;  in  such 
form  and  at  such  time  as  they  may  think  proper,  and  same  will  be 
duly  honored."  In  the  other :  "  Our  friend.  Colonel  Samuel  Dickins, 
is  authorized  in  negotiating  with  your  institution,  to  value  on  our 
house  in  New  Orleans,  at  any  time,  for  such  sums  as  he  may  think 
proper;   and  same  will  be  duly  honored  by  W.  and  F." 

These  letters  were  in  the  handwriting  of  Wilcox  and  Feron,  and 
in  the  possession  of  Dickins;  they  were  offered  to  show  that  he  was 
entitled  to  regular  notice  of  the  protest  of  the  bills  drawn  by  Dickins 
and  Taylor;    but  were  rejected  by  the  court  as  incompetent. 

The  plaintiif  resided  at  New  Orleans.  Jackson  is  the  county 
town  of  Madison  County,  Tennessee,  about  fourteen  miles  from 
Hazelwood,  the  defendant's  residence,  which  is  on  Spring  Creek, 
about  half  or  three-fourths  of  a  mile  from  a  post-office  called  Spring 
Creek  Post-office;  of  which  the  defendant  was  postmaster,  and  did 
his  business  there  in  June,  1833.  This  was  known  to  plaintiff,  who, 
about  and  before  the  3d  of  June,  1833,  directed  a  letter  to  defendant 
at  "  Hazelwood,  Spring  Creek,  Madison  County,  Tennessee,"  and 
one  to  "  Colonel  Samuel  Dickins,  postmaster,  Spring  Creek,  Madison 
County,  Tennessee."  At  the  trial,  the  plaintiff  offered  to  prove  by 
the  postmaster  at  Nashville,  and  his  deputy,  that  that  place  was  the 
distributing  office  for  letters  from  New  Orleans  intended  for  West 
Tennessee,  including  the  county  of  Madison;  that,  in  June,  1833, 
they  knew  defendant  was  postmaster  at  Spring  Creek;  that  if,  in 
distributing  the  mail,  they  had  seen  a  letter  addressed  to  defendant 
at  Hazelwood,  they  would  have  sent  it  to  Spring  Creek  Post-office; 
also  to  prove,  by  the  post-office  books  at  Nashville,  that,  on  the  13th 
of  June,  1833,  the  New  Orleans  mail  arrived  at  Nashville;  and,  on 
the  14th,  a  package  was  sent  to  Spring  Creek  Post-office,  which  had 
come  to  Nashville  for  distribution,  and  was  rated  at  fifty  cents 
postage. 

To  this  evidence  it  was  objected,  by  the  defendant,  that,  inasmuch 
as  the  putting  a  letter  into  the  post-office  containing  notice  of  a  pro- 
test, properly  directed,  forms  a  conclusive  legal  presumption  that 
such  notice  was  duly  given  and  received,  it  was  also  a  legal  presump- 
tion that  the  notice  went  to  the  place  directed  and  no  other;  and 
that  the  plaintiff  was  precluded  from  showing,  either  that  the  desti- 
nation of  the  letter  was  changed  on  its  passage,  or  was  in  point  of 
fact  sent  to  any  other  place. 

The  court  overruled  the  objection,  and  the  evidence  was  received. 

It  was  also  testified  that  letters  from  New  Orleans  for  the  western 
district  of  Tennessee  come  to  Nashville  for  distribution,  unless  there 
was  a  river  mail,  in  which  case  they  would  be  delivered  at  Memphis 


154  drawer's  contract. 

and  be  distribntcd  tlicnce;  other  evidence  was  also  given  in  relation 
to  the  course  of  the  mail,  and  the  usage  of  the  post-office  at  Nashville, 
which  is  needless  to  recite.  In  their  charge  to  the  jury^  the  court 
instructed  them  that  the  usage  of  a  distributing  office,  in  conformity 
to  law  and  the  authorized  regulations  of  the  department,  and  in  the 
discharge  of  the  official  duties  of  the  officers  employed,  might  properly 
be  taken  into  their  consideration  of  the  question  submitted  to  them ; 
which  was,  whether,  from  the  usual  course  of  the  mail,  and  the  usage 
as  proved,  the  notice  of  the  protest  would  necessarily  reach  Spring 
Creek  Post-office,  or  would  fail  to  reach  it,  or  be  carried  to  some  other 
office;  in  the  first  case,  the  court  instructed  them  that  the  notice 
was  served  on  the  defendant;  but  in  the  other,  the  drawer  was  dis- 
charged unless  actual  notice  was  served. 

Several  instructions  were  prayed  by  the  defendant,  which  the  view 
taken  by  the  court  renders  it  unnecessary  to  consider,  as  they  relate 
to  matters  not  material  to  the  cause;  and,  if  given  either  way,  they 
could  not  affect  the  right  of  either  party.  One,  however,  deserves 
particular  notice,  which  was,  "  that  the  evidence  of  the  notary  was 
not  sufficient  proof  that  a  legal  notice  was  sent;  but  that  he  ought 
to  have  set  out  a  copy  of  the  notice,  or  stated  its  contents,  in  order 
that  the  court  might  judge  whether  it  was  sufficient."  The  court 
refused  to  give  this  instruction;  but  stated  that  it  might  reasonably 
be  inferred  from  the  nature  of  the  notice,  and  from  the  fact  that 
notice  was  given,  as  stated  in  the  deposition. 

Exceptions  were  taken  to  the  decision  of  the  court  on  the  questions 
of  evidence,  and  the  various  matters  given  in  charge  to  the  jury. 

The  first  question  which  arises,  is  on  overruling  the  admission  in 
evidence  of  the  two  letters  from  Wilcox  and  Feron  to  the  cashier  of 
the  branch  bank  at  Nashville. 

It  was  in  full  proof  that  Taylor  and  Dickins  never  had  a  dollar 
in  the  hands  of  Wilcox  and  Feron  to  pay  any  draft  drawn  on  the 
latter,  nor  any  money  or  other  property  in  their  hands  to  meet  the 
bills  at  the  time  they  became  due,  or  any  funds  in  their  hands  when 
presented  and  protested  for  non-acceptance.  No  proof  was  offered 
that  Dickins  and  Taylor,  or  either  of  them,  had  made  any  consign- 
ment to  Wilcox  and  Feron,  as  an  expected  or  anticipated  fund  on 
which  to  draw.  It  was  also  proved  that  Jesse  Taylor  had  neither 
funds  nor  property  in  the  hands  of  the  drawees,  when  his  bill  in 
favor  of  Dickins  was  presented  for  acceptance,  or  when  it  became 
due;  and  that  they  had  received  no  advice  of  such  bill;  and  that 
the  two  bills  of  Dickins  and  Taylor,  drawn  in  favor  of  the  plaintiff, 
one  for  $2802,  and  the  other  for  $1598,  balanced  their  account  on 
his  books.  It  is  clear,  therefore,  that  this  transaction  was  not  a 
negotiation  within  the  meaning  or  intention  of  these  letters;  they 
evidently  referred  to  negotiations  at  the  bank,  or  within  the  sphere 
of  its  operations  in  the  commercial  transactions  of  the  firm;    the 


DICKINS   V.   BEAL.  155 

one  referring  to  Dickins  alone  was  expressly  limited  to  negotiations 
with  that  bank.  The  remittance  of  these  bills  to  New  Orleans  in 
payment  of  an  antecedent  debt  to  the  plaintiff,  was  in  no  sense  of 
the  term  a  negotiation  of  them,  and  was  so  utterly  inconsistent  with 
the  evident  object  of  the  letters,  that  the  most  remote  expectation 
could  not  have  been  entertained  that  they  would  have  been  accepted. 

A  mercantile  house  conducting  operations  at  Memphis  and  New 
Orleans,  would,  in  the  course  of  their  business,  lend  their  credit  in 
anticipation  of  consignments,  while  they  would  refuse  it  to  pay  the 
debts  due  to  other  persons;  these  considerations  could  not  escape 
the  consideration  of  Dickins  and  Taylor,  when  they  sought  to  make 
Wilcox  and  Feron  their  creditor,  instead  of  Beal  by  luch  a  fraudu- 
lent abuse  of  the  letters  of  credit.  Had  these  bills  come  to  the  hands 
of  an  innocent  holder  in  the  course  of  trade,  with  a  knowledge  of 
these  letters,  the  case  would  have  been  different;  or  if  the  bank  had 
negotiated  them,  there  would  have  been  a  reasonable  expectation 
that  they  would  have  been  honored;  but  Dickins  and  Taylor  could 
have  entertained  no  such  expectations.  The  letters  were,  therefore, 
properly  excluded,  and  the  case  must  be  considered  as  if  they  had 
not  existed. 

An  established  exception  to  the  general  rule  that  notice  of  the 
dishonor  of  a  bill  must  be  given  to  the  drawer  is,  where  he  has  no 
funds  in  the  hands  of  the  drawee;  but  of  this  exception  there  are 
some  modifications.  .  .  . 

If  the  drawer  has  made  or  is  making  a  consignment  to  the  drawee, 
and  draws  before  the  consignment  comes  to  hand.  .  .  . 

If  the  goods  are  in  transitu,  but  the  bill  of  lading  is  omitted  to 
be  sent  to  the  consignee  or  the  goods  were  lost.  .  .  , 

If  the  drawer  has  any  funds  or  property  in  the  hands  of  the 
drawee,  or  there  is  a  fluctuating  balance  between  them  in  the  course 
of  their  transactions  .  .  . ;  or  a  reasonable  expectation  that  the 
bill  would  be  paid.  ...  Or  if  the  drawee  has  been  in  the  habit  of 
accepting  the  bills  of  the  drawer  without  regard  to  the  state  of  their 
accounts,  this  would  be  deemed  equivalent  to  effects.  ...  Or  if  there 
was  a  running  account  between  them.  .  .  . 

In  all  such  cases,  the  drawer  is  considered  as  justified  in  drawing, 
as  so  far  having  a  right  to  draw,  that  "the  transaction  cannot  be 
denominated  a  fraud;  for  in  such  a  case  it  is  a  fair  commercial 
transaction,  in  which  the  drawer  has  a  reasonable  expectation  that  his 
bill  will  be  honored,  and  he  is  entitled  to  the  same  notice  as  a  drawer 
with  funds,  or  authority  to  draw  without  funds."  .  ,  . 

But  unless  he  draws  under  some  such  circumstances,  his  drawing 
without  funds,  property,  or  authority,  puts  the  transaction  out  of 
the  pale  of  commercial  usage  and  law;  and  as  he  can  in  no  wise 
suffer  by  the  want  of  notice  of  the  dishonor  of  his  drafts,  that  it  is 
deemed  a  useless  form.    "  Notice,  therefore,  can  amount  to  nothing, 


156  dkawek's  contract. 

for  his  situation  cannot  be  changed."  In  a  case  where  he  has  no  fair 
pretence  for  drawing,  there  is  no  person  on  whom  he  can  have  a 
legal  or  equitable  demand,  in  consequence  of  the  non-payment  or  non- 
acceptance  of  the  bill.  This  is  the  rule,  as  laid  down  by  this  court,  in 
French  v.  The  Bank  of  Columbia,  4  Cranch,  153,  164,  on  a  very  able 
and  elaborate  review  of  the  then  adjudged  cases,  which  is  fully  sup- 
ported by  those  since  decided  in  England,  and  in  the  Supreme  Court 
of  New  York.  The  case  of  the  defendant  falls  clearly  within  the 
rule  applicable  to  bills  drawn  without  funds,  or  any  bona  fide,  rea- 
sonable, or  Just  expectation  of  their  being  honored;  and  notice  of 
their  dishonor  was  not  necessary.  The  case  requires  no  opinion 
whether  notice  of  the  dishonor  of  Taylor's  bill  in  favor  of  Dickins 
was  necessary,  and  we  forbear  to  express  any. 
[A  question  of  manner  of  giving  notice.] 

Judgment  affirmed. 


CAREW  V.  DUCKWOETH. 

Court  of  Exchequer  of  England,  Trinity,  1869.     L.  R.   4  Ex.  313. 

The  drawer  of  a  cheque  is  presumptively  entitled  to  notice  of  dishonor;  and  this 
presumption  may  be  overturned  by  showing  want  of  reasonable  expectation  that  his 
cheque  will  be  honored. ^ 

Declaration  by  plaintiff  as  holder  of  the  defendant's  cheque  on 
the  Agra  Bank,  Limited,  for  £30,  averring  due  presentment  and 
non-pa3Tnent,  and  excusing  notice  of  dishonor  on  the  ground  that 
the  bank  "  had  not  in  their  hands  sufficient  or  any  effects  of  the 
defendant  for  payment  of  the  said  cheque  or  order,  nor  had  they 
received  any  consideration  for  the  payment  by  them  of  the  said 
cheque  or  order,  nor  had  the  defendant  at  any  time  any  reasonable 
ground  to  expect  that  the  said  Agra  Bank,  Limited,  would  pay  the 
said  cheque  or  order,  nor  has  the  defendant  sustained  any  damage 
by  reason  of  not  having  notice  of  the  non-payment  by  the  said  Agra 
Bank,  Limited,  of  the  said  cheque  or  order."  ^ 

Plea  traversing  the  averments  excusing  notice.     Issue. 

It  was  proved  that  the  cheque  was  given  after  banking  hours  on 
the  25th  of  February,  and  it  was  then  agreed  that  it  should  not 
be  presented  for  several  days.  The  defendant  then  had  £106  in 
the  bank.  The  cheque  was  presented  on  the  10th  of  March,  and 
dishonored. 

On  the  morning  of  March  2d  the  balance  in  the  defendant's  favor 
was  £18  175.  2d. ;  in  the  course  of  the  day  £48  6s,  Sd.  was  paid  in,  and 

1  Cf.  N.  I.  L.  §§131,202. 

•  The  presumptive  duty  to  notify  the  drawer  of  a  cheque  of  its  dishonor  shonld  bo 
noticed.  See  Chitty,  Precedents  in  Pleading,  117,  3d  Eng.  ed.,  whose  form  is  followed 
supra,  and  is  approved  in  Kemble  v.  Mills,  1  M.  &  G.  757,  769 ;  Bigelow,  Bills  and 
Notes,  76. 


CAKEW   V,   DUCKWORTH.  157 

£58  5s.  2d.  was  drawn  out,  leaving  a  balance  of  £8  18s.  M.;  and 
from  that  day  to  the  10th  of  March  the  largest  sum  in  the  bank  to 
the  defendant's  credit  was  £9  8s.  4J.  On  the  10th  £107  was  paid  in, 
and  £99  drawn  out,  which  left  to  the  defendant's  credit  a  balance  of 
£1  15s.  lid. 

It  was  also  proved  that  the  defendant  had  on  a  former  occasion 
overdrawn  his  account,  and  that  the  bank  had  thereupon  given  him 
notice  they  would  not  honor  overdrafts. 

The  jury  found  all  the  averments  of  the  declaration  in  favor  of  the 
plaintiff.  A  verdict  was  entered  for  the  plaintiff,  with  leave  to  the 
defendant  to  enter  a  verdict  for  him.  A  rule  having  been  obtained 
accordingly,  and  for  a  new  trial,  on  the  ground  that  the  verdict  was 
against  evidence,  the  cause  came  to  argument. 

[Argument  reported.] 

Bramwell,  B.  I  cannot  think  that  the  law  on  this  point  is  in  a 
very  satisfactory  condition.  The  true  rule  should  be,  that  no  notice 
of  dishonor  is  required  where  it  would  convey  no  information,  that  is, 
when  the  party  sued  knew  beforehand  that  the  bill  would  not  be  paid ; 
but  that  when  he  did  not  know,  it  is  right  that  he  should  be  informed 
of  the  non-payment.  If  this  rule  should  be  adopted,  the  question 
would  be,  did  he,  practically  speaking,  know  beforehand  that  the  bill 
would  not  be  honored?  This  may  depend  upon  a  variety  of  circum- 
stances ;  he  might  think  that  the  cheque  would  be  honored  by  favor, 
though  in  fact  there  were  no  assets  to  meet  it.  But  though  this  ought 
to  be  the  rule,  at  all  events  in  the  case  of  cheques  (and  I  am  not  sure 
that  it  is  not  the  rule  in  fact),  yet  it  is  not  always  to  be  found  laid 
down  in  those  terms,  and  perhaps  it  could  not  be  established  without 
doing  violence  to  some  of  the  cases. 

The  first  question,  then,  is,  had  the  defendant  funds  in  the  hands 
of  the  bank  to  meet  this  cheque?  Which  here  becomes  the  question, 
whether  there  was  evidence  from  which  the  jury  could  find  this  fact 
in  the  negative.  The  defendant  had  the  sum  of  £106  in  the  bank  at 
the  time  when  he  drew  the  cheque,  but  the  question  of  his  right  to 
notice  of  dishonor  must  be  considered  in  connection  with  his  request 
that  the  cheque  should  not  be  presented  for  several  days.  Now  the 
important  question  is,  whether  the  drawer  thinks  that  there  will  be 
funds  to  meet  the  draft,  whether  bill  or  cheque,  when  it  is  presented 
for  payment.  If  I,  in  London,  draw  on  a  bank  in  York,  where  I  have 
£1000,  which  I  know  will  be  drawn  out  to-day,  while  the  cheque  can- 
not be  presented  till  to-morrow,  it  is  idle  to  say  that,  knowing  there 
will  be  no  funds  there  at  any  time  when  the  cheque  can  be  presented, 
I  am  entitled  to  notice  of  dishonor.  The  question  therefore  is,  what 
was  the  state  of  the  funds  at  the  time  when  the  bill  ought  in  regular 
course  to  have  been  presented  ?  Then  the  question  arises,  what  is  the 
meaning  of  several  days  or  a  few  days?    The  jury  may  well  have 


158  drawer's  contract. 

thought  that  it  at  least  postponed  the  presentment  till  the  2d  of 
]\laixli.  Now  from  March  the  2d  till  the  10th,  when  the  cheque  was 
actually  presented,  there  was  not  at  any  time  a  greater  sum  than 
£9  8s.  4d.  available  for  its  payment.  There  was  evidence  in  the 
accounts  to  show  that  the  defendant  paid  in  money  to  his  account, 
but  he  at  once  drew  out  as  much  as  he  paid  in,  or  the  money  was  so 
paid  in  and  dealt  with  that  it  was  not  applicable  to  the  payment  of 
this  cheque.  This  was  evidence  on  which  the  jury  might  find  that 
the  defendant  had  not,  in  fact,  funds  in  the  bank  at  the  time  when 
the  bill  was  presented. 

But  Mr.  Sharpe  [for  the  defendant]  says,  that  if  there  were  any 
funds,  the  defendant  was  entitled  to  notice  of  dishonor.  This  cannot 
be  so ;  the  question  must  be  whether,  practically,  there  were  funds  to 
such  an  amount  as  that  at  the  time  of  drawing  he  could  reasonably 
expect  payment.  For  though  the  expression  "  any  funds  "  is  used  in 
some  cases,  it  is  preposterous  to  suppose  that,  because  there  was  an 
old  balance  of  £50  to  the  credit  of  a  customer,  he  would  thereby  be 
entitled  to  notice  of  dishonor  of  a  cheque  for  £5000.  The  question 
then  must  be,  whether  there  were  any  such  funds  as  the  drawer  might 
reasonably  and  properly  draw  against,  with  an  expectation  that  the 
draft  would  be  honored.  We  may  read  the  allegations  in  the  declara- 
tion that  the  defendant  had  not  sufficient,  nor  any,  funds  for  the 
payment  of  the  cheque,  as  meaning  that  he  had  no  funds  adequate  for 
its  payment,  no  funds  against  which  he  was  entitled  to  draw  the 
cheque  in  question.  Therefore,  as  to  this  first  question,  I  think  there 
was  evidence  for  the  jury  that  there  were  no  such  funds  in  hand, 
from  the  time  when  the  defendant  would  expect  the  cheque  to  be  pre- 
sented up  to  the  time  when  it  was  presented  in  fact,  as  to  give  him 
ground  to  suppose  that  the  cheque  would  be  honored;  and  I  think 
that  this  fact  was  rightly  so  found.  Secondly,  it  is  quite  plain  that 
there  was  evidence  for  the  jury  that  the  defendant  had  no  reason  to 
expect  that  the  cheque  would  be  honored ;  and  I  also  think  that  they 
were  right  in  so  finding.  There  were  eight  entire  days  after  the  time 
when  the  defendant  might  first  expect  the  cheque  to  be  presented, 
on  none  of  which  had  he  any  reason  to  expect  that  it  would  be  paid, 
for  he  had  no  right  to  expect  that  any  cheque  would  be  paid  which  he 
had  not  sufficient  effects  to  meet. 

Cleasby,  B.  I  am  also  of  the  same  opinion.  The  issue  is  distinct, 
and  involves  the  question  whether  the  defendant  had  reasonable 
ground  for  expecting  that  the  cheque  would  be  paid.  That  this  is  a 
material  question  appears  from  Kemble  v.  Mills,  1  M.  &  G.  757,  7G1, 
where,  the  declaration  being  objected  to,  Tindal,  C.  J.,  says :  "  I  sup- 
pose the  objection  is,  that  it  is  not  stated  that  the  defendant  had  no 
reason  to  expect  that  the  bill  would  be  paid ;  "  this  shows  (though  the 
declaration  was  in  that  case  held  sufficient)  that  the  allegation  of 
want  of  reasonable  ground  for  the  expectation  of  payment  is  an  im- 


KINYON  V.   STANTON.  159 

portant  and  a  necessary  averment,  and  is  therefore  an  essential 
matter  for  consideration.  The  existence  of  such  reasonable  grounds 
must  obviously  be  a  question  for  the  jury.  Now,  here  the  cheque  was 
given  with  a  request  that  it  should  not  be  presented  for  a  few  days; 
but  it  is  nevertheless  said  that  if  at  the  time  of  drawing  it  there  were 
funds  the  drawer  is  entitled  to  notice  of  dishonor.  But  can  it  be  said 
that  after  a  cheque  has  been  given  with  such  a  request,  and  its  drawer 
next  day  draws  out  the  whole  of  his  funds,  and  never  afterwards  pays 
in  a  farthing,  nor  has  any  reasonable  expectation  of  funds  coming  in, 
so  that  he  must  well  know  that  there  never  can  be  any  funds  to  meet 
the  cheque,  he  is  not  completely  aware  that  the  cheque  will  not  be 
paid  in  fact?  Then  put  the  case  of  a  small  sum  being  paid  in, 
quite  insufficient  to  satisfy  the  cheque,  the  question  will  still  be,  was 
there  any  reasonable  expectation  that  there  would  be  funds  to  meet 
the  cheque  ?  The  jury  have  found  that  the  defendant  had  no  reason- 
able expectation  that  the  cheque  would  be  paid,  and  I  think  there  was 
sufficient  ground  for  that  finding. 

Channell,  B.,  delivered  a  short  concurring  opinion, 

RuU  discharged. 


KINYON    V.    STANTON. 

Supreme  Court  of  Wisconsin,  January,  1878.     44  Wis.  479. 

Or  by  showing  that  he  did  not  suffer  prejudice  by  the  failure  to  give  notice ;  even 
in  case  of  loss,  he  is  discharged  only  to  the  extent  thereof.^ 

Action  against  the  drawers  for  the  amount  of  a  cheque  qn  the 
Corn  Exchange  Bank  of  Waupun  in  favor  of  the  plaintiff.  The 
cheque  was  never  presented  for  payment,  and  some  eight  days  after 
it  was  drawn  the  bank  closed  its  doors;  three  weeks  later  it  was 
adjudged  bankrupt.  From  the  time  the  cheque  was  drawn  until  the 
bank  suspended  payment  the  drawers  had  more  than  enough  money 
in  the  bank  to  meet  the  cheque.  The  cheque  might  have  been  pre- 
sented in  the  interval;  and  the  bank  would  then  have  honored  it 
down  to  the  day  of  closing,  even  without  regard  to  the  state  of  the 
defendants'  account.  Just  before,  and  on  the  day  the  bank  suspended 
payment,  the  defendants,  having  heard  rumors  affecting  the  bank, 
drew  out  all  their  funds,  part  in  favor  of  themselves,  part  in  favor  of 
another.  The  defendants  some  da^^s  later  refused  to  pay  the  cheque. 
For  the  sum  drawn  out  by  the  defendants  for  themselves  an  action 
was  afterwards  successfully  brought  by  the  bank's  assignee,  in  the 
federal  court. 

Judgment  for  the  plaintiff  for  the  full  sum ;   defendants  appealed. 

[Argument  not  reported,] 

1  N.  I.  L.  §  203. 


160  drawer's  contract. 

Ryan,  C.  J.  Doubtless  the  respondent  was  guilty  of  negligence  in 
holding  the  cheque  of  the  appellants  so  long  without  presenting  it  to 
the  bank  for  payment.  And  if  the  appellants  had  left  funds  in  the 
bank  to  meet  it  until  the  failure  of  the  bank,  the  negligence  of  the 
respondent  would  have  discharged  the  appellants  from  all  liability 
over,    Jones  v.  Heiliger,  36  Wis.  149. 

But  the  appellants  saw  fit  to  draw  out  their  entire  account  in  the 
bank  before  its  failure ;  and  doing  so,  must  be  held  in  good  faith  to 
have  intended,  as  they  are  liable,  themselves  to  protect  the  cheque 
which  they  had  given  to  the  respondent.  And  so  the  negligence  of 
the  respondent  did  not  prejudice  the  appellants. 

This  view  is  not  affected  by  the  fact  that  the  bank  would  probably 
have  paid  the  cheque,  without  regard  to  the  state  of  the  appellants' 
account,  at  any  time  before  the  day  of  the  bank's  failure.  On  that 
day  the  bank  apparently  would  not  have  honored  the  cheque  without 
funds  of  the  appellants  sufficient  to  meet  it.  If  at  any  time  the  bank 
had  paid  the  cheque  without  funds  of  the  appellants,  they  would  have 
been  liable  to  the  bank  for  the  amount  advanced  to  pay  it.  It  was 
immaterial  to  them  whether  they  should  owe  the  amount  to  the  bank 
or  to  the  respondent.  Certain  it  is  that  they  must  owe  it  to  one  or 
the  other.  And  they  elected  to  owe  it  to  the  respondent.  As  between 
the  parties  here  the  appellants  could  have  escaped  liability  over  only 
by  leaving  funds  in  the  bank  to  meet  the  cheque,  from  the  day  it  was 
given  until  the  failure  of  the  bank.  They  cannot  expect  to  draw  all 
their  funds  from  the  bank  before  its  failure,  and  then  escape  liability 
upon  a  cheque  previously  drawn,  merely  because  the  bank  failed. 

It  makes  no  difference  in  the  relation  of  the  parties  that  the 
assignee  of  the  bank  in  bankruptcy  afterwards  recovered  against  the 
appellants  the  balance  which  they  drew  out  in  favor  of  themselves  on 
the  day  of  the  failure,  and  in  view  of  it.  That  recovery  went  upon 
what  the  federal  court  must  have  held  a  fraud  upon  the  bankrupt  law. 
The  state  law  gave  them  perfect  right  to  do  as  they  did.  And  the 
recovery  in  the  federal  court,  even  if  the  amount  had  been  sufficient 
to  pay  the  cheque,  leaves  the  fact  untouched  that  the  appellants  had 
in  fact  withdrawn  all  their  funds  from  the  bank,  leaving  nothing  to 
meet  the  cheque  which  they  had  given  to  the  respondent.^ 

By  the  Court.    The  judgment  of  the  court  below  is 

Affirmed. 

^  But  had  the  appellants  "  withdrawn "  their  funds  ?  Certainly  they  had  not 
legally  done  so,  as  the  court  held  in  allowing  a  recovery  by  the  bank  ;  and  that  this 
was  under  the  federal  law  seems  to  be  immaterial,  since  that  law  was  as  binding  on 
the  plaintiff  and  defendants  as  was  the  state  law. 


BEAUREGAKD  V.   KNO^VLTON.  161 

BEAUEEGAED   v.   KNOWLTON. 

Supreme  Court  of  Massachusetts,  May,  1892.     156  Mass.  395. 

Bat  reasonable  ground  to  draw  does  not,  necessarily,  depend  upon  the  presence  of 
funds  in  the  drawee's  hands,  even  in  the  case  of  a  cheque. 

Action  by  the  holder  of  a  cheque  against  the  drawer.  The  facts 
appear  in  the  opinion. 

[Argument  not  reported.] 

Barker,  J.  The  action  is  upon  cheques  which  have  never  been 
presented  to  the  bank  upon  which  they  were  drawn.  The  only  ques- 
tion argued  is  as  to  the  correctness  of  the  ruling,  that,  if  the  facts 
were  as  testified  to  by  the  president  of  the  bank,  the  plaintiff  was 
excused  from  presenting  them.  The  cheques  were  given  for  value,  and 
were  dated  on  December  16,  1889,  one  for  the  sum  of  $250,  bearing 
a  pencil  memorandum,  "  Draw  Dec.  19th  " ;  one  for  $125,  bearing  a 
similar  memorandum,  "Draw  Dec.  26th";  and  one  for  $125,  with 
a  memorandum,  "  Draw  Dec.  28th."  They  were  signed  by  the  de- 
fendant with  the  name  of  J.  G.  Knowlton  &  Co.,  which  was  the  style 
under  which  he  did  business.  The  president  of  the  bank  testified, 
that  on  December  16,  1889,  and  during  the  remainder  of  that  month 
and  the  following  January,  J.  G.  Knowlton  &  Co.  had  no  funds  in 
the  bank ;  but  that  one  M.  E.  Knowlton  had  an  account  at  the  bank, 
and  the  bank  had  written  authority  from  him  to  pay  cheques  signed 
by  J.  G.  Knowlton  &  Co.,  charging  the  same  to  the  account  of  M.  E. 
Knowlton,  and  that,  acting  upon  this  authority,  the  bank  had  been  in 
the  habit  of  so  doing;  and  that  on  December  16,  1889,  the  deposit  of 
M.  E.  Knowlton  was  $51.15;  on  December  19,  $117.28;  on  Decem- 
ber 26,  $61.13 ;  and  on  December  28,  $8.18. 

We  presume  that,  under  ordinary  circumstances,  the  drawer  of  a 
cheque  is  not  liable  to  a  suit  upon  it  without  presentment  to  the  bank 
and  dishonor.  Kelley  v.  Brown,  5  Gray,  108 ;  Tassell  v.  Lewis,  1  Ld. 
Eaym.  743 ;  Cruger  v.  Armstrong,  3  Johns.  [Cases]  5 ;  Conroy  r. 
Warren,  3  Johns.  [Cases]  259 ;  Murray  v.  Judah,  6  Cowen,  484,  490; 
Little  V.  Phenix  Bank,  2  Hill  (N.  Y.),'425 ;  Case  v.  Morris,  31  Penn. 
St.  100,  104 ;  Purcell  v.  Allemong,  22  Gratt.  739 ;  Woodruff  v.  Plant, 
41  Conn.  344,  347 ;  Foster  v.  Paulk,  41  Maine,  425.  But  the  cases 
cited,  and  many  others,  hold  that  a  cheque  is  in  the  nature  of  a  bill 
of  exchange  payable  on  demand,  and  that  many  of  the  same  rules 
apply  to  both.  Bamet  v.  Smith,  30  N.  H.  256,  264;  Bickerdike  v. 
Bollman,  1  T.  E.  405 ;  Boehm  v.  Sterling,  7  T.  E.  423,  426.  The 
drawer  of  a  bill  of  exchange  is  liable  without  presentment,  if  he  has 
no  effects  in  the  hands  of  the  drawee,  imless  the  drawee  has  something 
equivalent  to  effects,  or  has  agreed  to  accept  and  pay,  or  the  drawer 

11 


162  drawer's  contract. 

has  some  ground  for  a  reasonable  expectation  that  the  bill  will  be  ac- 
cepted and  paid.  Kinsley  v.  Robinson,  21  Pick.  327,  328,  and  cases 
cited;  Commercial  Bank  v.  Hughes,  17  Wend.  94,  97.  The  same  gen- 
eral principles  are  applied  to  cheques;  and  presentment  is  excused 
where  the  making  of  the  cheque  was  a  fraud  upon  the  part  of  the 
drawer,  he  having  no  funds  in  the  bank,  and  no  ground  for  a  reason- 
able expectation  that  it  would  be  paid.  Byles  on  Bills  (11th  ed.), 
216;  Chitty  on  Bills  (12th  Am.  ed.),  515;  Franklin  v.  Vanderpool, 
1  Hall,  78;  Harker  v.  Anderson,  21  Wend.  372,  375;  Case  v.  Morris, 
31  Penn.  St.  100,  104 ;  Sterrett  v.  Eosencrantz,  3  Phila.  54 ;  Hoyt  v. 
Seeley,  18  Conn.  353,  360 ;  True  v.  Thomas,  16  Maine,  36 ;  Foster  v. 
Paulk,  41  Maine,  425,  428 ;  Terry  v.  Parker,  6  A.  &  E.  502 ;  Wirth  v. 
Austin,  L.  E.  10  C.  P.  689. 

In  this  case  the  drawer  had  no  funds  in  the  bank,  and  no  authority 
from  the  bank  to  draw  upon  it.  One  M.  E.  Knowlton  had  a  deposit 
account  with  the  bank,  and  had  given  it  authority  to  pay  and  charge 
to  his  account  cheques  signed  by  J.  G.  Knowlton  &  Co.,  and  the  bank 
had  been  in  the  habit  of  so  doing.  But  the  deposit  of  M.  E.  Knowl- 
ton was  never  sufficient  to  pay  any  one  of  the  cheques  in  suit,  and 
the  bank  had  no  authority  to  allow  the  account  of  M.  E.  Knowlton  to 
be  overdrawn  by  such  cheques,  and  there  was  no  evidence  that  it  had 
ever  pursued  such  a  course ;  so  that  the  defendant  could  have  had  no 
ground  for  a  reasonable  expectation  that  the  cheques  would  be  hon- 
ored bv  the  bank.  When  the  defendant  made  them,  he  knew  they 
would  not  be  paid  if  presented,  as  well  as  though  there  had  been  no 
arranorement  as  to  his  cheques  between  the  bank  and  M.  E.  Knowlton. 
Notice  of  non-payment  would  have  given  him  no  new  knowledge. 
The  presentment  of  either  of  the  cheques  would  not  have  entitled  the 
plaintiff  to  demand  from  the  bank  the  actual  balance  to  the  credit  of 
M  E.  Knowlton.  Dana  v.  Third  National  Bank,  13  Allen,  445.  So 
that  the  facts  testified  to  show  affirmatively  that  no  loss  happened  to 
the  defendant  by  the  omission  of  presentment. 

Exceptions  overruled. 


WHISTLEK  V,   FORSTER.  163 


CHAPTER   VIII. 
indorsee's  contract. 


WHISTLER   V.   FORSTER. 
Common  Pleas  of  England,  Easter,  1863.     14  C.  B.  N.  s.  248. 

One  who  purchases  a  negotiable  instrument,  payable  to  order,  without  indorsement, 
acquires  only  the  rights  of  his  vendor ;  i  and  if  indorsement  is  made  subsequent  to 
the  transfer,  and  after  the  transferee  acquires  knowledge  of  a  defence  available 
against  his  transferor,  the  transferee  is  subject  to  such  defence. 

Action  by  indorsee  against  the  drawer  of  a  cheque,  payable  to 
A.  S.  Griffiths  &  Co.,  or  order,  and  indorsed  by  the  payees  to  the 
plaintiff. 

The  defendant  traversed  the  drawing  and  indorsement  of  the 
cheque,  and  also  pleaded  that  he  was  induced  to  draw  it  by  and 
through  the  fraud  of  Griffiths  &  Co.,  and  that  there  never  was  any 
value  or  consideration  for  the  indorsement  to  the  plaintiff  or  for  the 
plaintiff's  holding  of  it,  and  that  he  had  notice  of  the  premises  before 
and  when  the  cheque  was  first  indorsed  to  him,  and  took  the  same 
from  Griffiths  &  Co.  with  such  notice.     Issue  thereon. 

The  following  facts  appeared  on  the  trial :  The  cheque  in  question, 
which  bore  a  Id.  stamp,  was  drawn  by  the  defendant  some  day  before 
the  3d  of  October,  1862,  and  handed  by  him  to  Griffiths  upon  an 
understanding  that  it  was  not  to  be  presented  for  payment  until  the 
4th,  and  an  undertaking  by  Griffiths  to  furnish  the  defendant  with 
funds  to  meet  it  early  on  the  morning  of  that  day,  which,  however,  he 
failed  to  perform.  Griffiths  on  the  3d  gave  the  cheque  to  the  plaintiff 
for  value,  but  did  not  then  indorse  it.  At  the  time  he  received  the 
cheque  he  had  no  notice,  apart  from  the  want  of  indorsement  to  him, 
of  the  way  in  which  Griffiths  had  obtained  it  from  the  defendant,  but 
before  he  obtained  the  indorsement  he  had  notice  of  the  facts. 

On  the  part  of  the  defendant  it  was  submitted  that  the  plaintiff 
could  not  recover  upon  the  cheque,  first,  because  it  was  post-dated, 
and,  secondly,  because  before  he  obtained  Griffiths's  indorsement  he 
had  notice  of  the  fraud  practised  by  Griffiths  upon  the  defendant. 

The  learned  judge  directed  a  verdict  to  be  entered  for  the  defend- 
ant, reserving  leave  to  the  plaintiff  to  move  to  enter  a  verdict  for  hipi 

1  N.  I.  L.  §  6«. 


164  indorsee's  contract. 

if  the  court  should  be  of  opinion  that  the  cheque,  though  post-dated 
and  unstamped  (otherwise  than  with  the  penny  stamp  imposed  by 
21  &  22  Vict.  c.  20,  §  1),  was  a  valid  instrument,  and  that  the  plain- 
tiff had  a  sufficient  interest  in  the  cheque  to  entitle  him  to  sue  upon 
it  before  he  received  information  of  the  alleged  fraud.  Rule  nisi 
obtained. 

[Argument  reported.] 

Erle,  C.  J.  This  is  an  action  against  the  drawer  of  a  bill  of 
exchange ;  for  though  in  form  a  cheque,  the  instrument  is  for  all  the 
purposes  of  the  Stamp  Act  a  bill.  The  plea  is  that  the  bill  was  ob- 
tained from  the  defendant  by  one  Griffiths  by  means  of  fraud,  and 
that  it  was  indorsed  to  the  plaintiff  after  he  had  notice  of  the  fraud. 
The  facts  are  shortly  these:  The  instrument  was  a  negotiable  in- 
strument which  had  been  fraudulently  obtained  from  the  defendant 
by  Griffiths  and  had  been  handed  over  by  Griffiths  to  the  plain- 
tiff in  part  satisfaction  of  debt  of  a  larger  amount.  But  Griffiths, 
at  the  time  he  so  handed  over  the  bill  to  the  plaintiff,  omitted 
to  indorse  it.  Under  these  circumstances  the  condition  of  things 
was  this,  that  the  plaintiff  had  at  that  time  the  same  rights  as  if 
an  ordinary  chattel  had  passed  to  him  by  an  equitable  assignment; 
he  would  have  all  the  rights  which  Griffiths  could  convey  to  him. 
Now,  Griffiths  having  defrauded  the  defendant  of  the  bill,  he  could 
pass  no  right  by  merely  handing  over  the  bill  to  another.  Accord- 
ing to  the  law  merchant,  the  title  to  a  negotiable  instrument  passes 
by  indorsement  and  delivery.  A  title  so  acquired  is  good  against 
all  the  world,  provided  the  instrument  is  taken  for  value  and  with- 
out notice  of  any  fraud.*  The  plaintiff's  title  under  the  equitable 
assignment  here  therefore  was  to  be  rendered  valid  by  indorsement; 
but  at  the  time  he  obtained  the  indorsement  he  had  notice  that  the 
bill  had  been  fraudulently  obtained  by  Griffiths  from  the  defendant 
and  that  Griffiths  had  no  right  to  make  the  indorsement.  Assuming 
therefore  that  there  may  be  conflicting  equities  between  the  plaintiff 
and  the  defendant,  I  think  the  right  should  prevail  according  to  the 
rule  of  law,  and  that  the  plaintiff  had  no  title  as  transferee  of  the  bill 
at  all. 

Then  as  to  the  stamp  .  .  .  [Properly  stamped.] 

WiLLES,  J.  I  concur  with  my  lord  as  to  both  points.  .  .  .  [Prop- 
erly stamped.] 

As  to  the  second  point,  the  general  rule  of  law  is  undoubted,  that 
no  one  can  transfer  a  better  title  than  he  himself  possesses ;  nemo  dat 
quod  iron  hahet.  To  this  there  are  some  exceptions,  one  of  which 
arises  out  of  the  rule  of  the  law  merchant  as  to  negotiable  instru- 
ments.   These,  being  part  of  the  currency,  are  subject  to  the  same 

1  Or  other  equity. 


LANCASTER  NATIONAL  BANK  V.   TAYLOR.         165 

rule  as  money;  and  if  such  an  instrument  be  transferred  in  good 
faith,  for  value,  before  it  is  overdue,  it  becomes  available  in  the  hands 
of  the  holder,  notwithstanding  fraud  vrhich  vrould  have  rendered  it 
unavailable  in  the  hands  of  a  previous  holder.  This  rule,  however,  is 
only  intended  to  favor  transfers  in  the  ordinary  and  usual  manner 
whereby  a  title  is  acquired  according  to  the  law  merchant,  and  not  to 
a  transfer  which  is  valid  in  equity  according  to  the  doctrine  respect- 
ing the  assignment  of  choses  in  action,  now  indeed  recognized  and  in 
many  instances  enforced  by  courts  of  law ;  ^  and  it  is  therefore  clear 
that,  in  order  to  acquire  the  benefit  of  this  rule,  the  holder  of  the  bill 
must,  if  it  be  payable  to  order,  obtain  an  indorsement,  and  that  he  is 
affected  by  notice  of  a  fraud  before  he  does  so.  Until  he  does  so,  he 
is  merely  in  the  position  of  the  assignee  of  an  ordinary  chose  in 
action,  and  has  no  better  right  than  his  assignor.  When  he  does  so, 
he  is  affected  by  fraud  which  he  knew  of  before  the  indorsement. 
Keating,  J.,  delivered  a  concurring  opinion. 

Rule  discharged. 


LANCASTER   NATIONAL   BANK   v.   TAYLOR. 

Supreme  Court  of  Massachusetts,  October,  1898.     100  Mass.  18, 

And  if  the  indorsement  is  not  made  until  after  the  maturity  of  the  instrument,  the 
holder  is  charged  with  notice  of  all  defences  available  against  his  transferor,  and  is 
subject  to  them. 

Action  of  contract  on  a  promissory  note  by  the  holder  against  the 
maker.  The  note  was  payable  to  J.  S.  Butterick  or  order,  and  was 
transferred  by  him  to  the  plaintiff  before  maturity,  but  without  in- 
dorsement. The  indorsement  of  Butterick  was  written  upon  the  note 
after  maturity,  and  while  the  note  was  in  the  hands  of  the  plaintiff. 
Verdict  for  the  plaintiff  and  exceptions  by  the  defendant  to  certaiii 
rulings.    The  facts  appear  further  in  the  opinion. 

[Argument  reported.] 

Foster,  J.  The  rule  that  the  indorsee  of  a  negotiable  promissory 
note,  who  has  taken  it  before  maturity  for  value  and  without  notice 
of  any  want  of  consideration  or  other  defect  rendering  it  void  in  its 
inception,  can  enforce  it  against  the  maker,  notwithstanding  it  was 
valueless  in  the  hands  of  the  original  payee,  is  founded  upon  the 
custom  of  merchants  and  the  Statute  of  3  &  4  Anne,  c.  9.^  It  is  an 
exception  to  the  general  rule  of  the  common  law ;  according  to  which 
a  written  promise  can  be  enforced  only  in  the  name  of  the  party  to 
whom  it  is  made,  and,  if  it  has  been  assigned,  although  the  assignee 
is  allowed  to  bring  an  action  upon  it  in  the  name  of  his  assignor,  yet 

1  Cf.  Rev.  Laws  of  Mass.  c  173,  §  4,  >  Ante,  p.  15. 


166  indorsee's  contract. 

he  has  no  greater  rights  than  the  assignor  possessed,  and  the  instru- 
ment remains  subject  to  every  defence  that  would  have  existed  if  no 
assignment  had  taken  place.  The  ordinary  rule  applies  to  all  notes 
which  are  not  negotiable,  and  to  all  negotiable  notes  which  are  not 
duly  indorsed  for  value  before  maturity.  A  note  not  negotiable  may 
be  assigned  and  transferred  like  any  other  chose  in  action,  but  can 
be  sued  only  in  the  name  of  the  payee,  and  is  liable  to  every  defence 
existing  against  him.  A  negotiable  note  not  transferred  until  it  is 
overdue  may  be  sued  in  the  name  of  the  indorsee,  but  as  to  defences 
must  be  treated  precisely  like  one  not  negotiable.  And  a  negotiable 
note  which  is  transferred  before  maturity,  but  not  indorsed  until 
afterwards,  in  our  opinion  can  stand  on  no  better  footing.  Whoever 
receives  it  takes  a  contract  which  upon  its  face  shows  that  it  is  sub- 
ject to  every  defence  that  could  have  been  made  between  the  original 
parties.  There  is  no  custom  of  merchants  in  favor  of  such  an 
assignee,  and  no  rule  of  law  by  which  he  is  entitled  to  greater  rights 
than  the  payee.  If  the  contract  was  originally  invalid  for  want  of 
consideration  or  other  cause,  so  will  it  be  in  any  other  hands  into 
which  it  passes  before  the  legal  title  is  transferred  by  regular  indorse- 
ment. No  such  indorsement  having  been  made  before  the  note  is 
overdue  and  dishonored,  any  subsequent  one  takes  effect  only  from 
its  date.  There  is  no  doctrine  known  to  the  mercantile  law  by  which 
it  can  relate  back  to  the  time  of  the  equitable  transfer,  and  place  the 
assignee  in  the  same  position  as  if  he  had  been  before  maturity  the 
holder  of  the  note  for  value. 

It  is  true  a  distinction  between  negotiable  and  unnegotiable  notes 
has  been  recognized  in  regard  to  the  set-off  allowed  by  statute,  and, 
where  a  negotiable  note  was  transferred  for  value  before  it  was  dis- 
honored, but  not  indorsed  till  afterwards,  a  previously  existing  set-off 
of  a  distinct  demand  against  the  payee  was  not  allowed  to  prevail. 
Eanger  v.  Gary,  1  Met.  369.  The  set-off  of  distinct  demands  is  a 
matter  regulated  by  statute,  and  not  a  common-law  defence.  And 
the  court  carefully  limit  the  application  of  their  opinion,  saying  that 
"  here  is  no  question  of  want  or  failure  of  consideration  of  this  note; 
no  offer  to  prove  payment  of  it;  but  the  defendants  rely  on  an 
account  filed  in  offset."  This  case  is  therefore  no  authority  against 
the  conclusion  to  which  we  are  conducted  by  applying  the  elementary 
principles  of  the  law  merchant. 

The  facts  in  the  present  action  show  that  the  defendant  intrusted 
to  Butterick  his  signature  to  a  blank  note,  with  authority  to  write  over 
it  a  note  of  one  hundred  dollars  for  the  benefit  of  one  Henry;  that 
Butterick  fraudulently  filled  up  the  note  now  in  suit  so  as  to  make  it 
one  for  the  sum  of  a  thousand  dollars  payable  to  his  own  order,  and 
passed  it  to  the  Lancaster  Bank  in  payment  of  a  former  note,  that  is, 
for  a  valuable  consideration.  But  Butterick  did  not  then  indorse 
the  note;  and  it  remained  in  the  hands  of  the  bank  unindorsed  till 


EIDER  V.   TAINTOR.  167 

after  its  maturity.  At  a  later  date,  when  the  note  was  overdue  and 
the  bank  had  notice  of  all  these  facts,  Butterick  did  indorse  it.  Un- 
deniably, if  he  had  done  so  originally,  the  defendant  would  have  been 
liable.  Having  placed  it  in  the  power  of  Butterick  to  perpetrate  such 
a  fraud,  the  injury  caused  by  the  defendant's  own  negligence  must 
have  been  borne  by  himself,  and  not  by  the  bank,  which  was  in  no 
fault  and  guilty  of  no  want  of  due  care.  But  the  defendant  is  liable 
only  upon  and  to  the  extent  of  the  contract  which  was  written,  and 
not  for  one  which  might  have  been  but  was  not  made.  The  bank  saw 
fit  to  take  the  note,  which  purported  to  be  in  favor  of  Butterick, 
without  requiring  him  to  indorse  it.  They  therefore  took  it  subject 
to  any  defence  which  might  be  made  to  an  action  in  Butterick's 
name.  And  the  subsequent  indorsement  does  not  improve  their 
position.  When  the  note  came  into  the  hands  of  the  bank  payable 
to  the  order  of  Butterick,  and  not  indorsed  by  him,  the  very  form  of 
the  instrument  gave  notice  that  no  one  could  bring  an  action  upon  it 
except  in  the  name  of  Butterick,  and  that  it  was  subject  to  every 
defence  affecting  its  original  validity  which  could  have  been  made  to 
it  while  it  continued  in  his  hands. 

There  is  a  recent  English  case  in  which  this  identical  question  has 
been  determined  by  eminent  judges  of  great  experience  and  authority 
in  mercantile  law.  .  .  .  Whistler  v.  Forster,  14  C.  B.  n.  s.  248, 
ante,  p.  163. 

In  the  opinion  of  a  majority  of  the  court,  these  citations  express 
with  fulness  and  accuracy  the  rule,  and  the  limitations  of  the  rule, 
of  the  law  merchant,  which  gives  to  the  bona  fide  indorsee  for  value 
before  maturity  of  a  negotiable  instrument  a  better  title  and  a  more 
complete  right  of  action  than  the  original  payee  of  the  instrument 
may  have  possessed.  The  learned  judge  at  the  trial  having  pro- 
ceeded upon  a  different  view  of  the  law,  the 

Exceptions  are  sustained. 


EIDEE  V.  TAINTOR. 

Supreme  Court  of  Massachusetts,  September,  1862.     4  Allen,  356. 

No  indorsement  of  an  instrument  payable  to  bearer  is  necessary  to  pass  title  ac- 
cording to  the  law  merchant.^ 

Contract  upon  the  following  promissory  note:  "$107.  Six 
months  from  date,  for  value  received  I  promise  to  pay  Stephen  E. 
Avery  or  bearer  one  hundred  and  seven  dollars  with  use.  Lee,  Decem- 
ber 1,  1860.  Albert  J.  Taintor."  The  note  bore  the  following  in- 
dorsements :  "  Pay  E.  A.  Bliss,  cashier,  or  order.  Warren  Newton, 
cashier." 

1  N.  I.  L.  §  47. 


168  indoeser's  contract. 

At  the  trial  in  the  Superior  Court,  it  appeared  that  the  plaintiif 
had  purchased  the  note  in  suit  before  it  became  due  for  a  full  con- 
sideration, but  the  bill  of  exceptions  stated  that  "  there  was  no  evi- 
dence that  E.  A.  Bliss,  to  whom  said  note  had  been  indorsed,  had 
transferred  or  indorsed  said  note  to  the  plaintiff ; "  or  "  that  the 
plaintiff  had  any  title  in  said  note  from  Bliss,  or  that  said  note 
was  sued  with  the  knowledge  or  assent  of  said  Bliss."  Eockwell,  J., 
ruled  that  the  plaintiff  was  entitled  to  recover,  and  the  jury  returned 
a  verdict  accordingly ;  and  the  defendant  alleged  exceptions. 

[Argument  not  reported.] 

BiGELOvr,  C.  J.  The  contract  of  the  promisor  of  the  note  de- 
clared on  is  to  pay  the  sum  due  on  the  note  at  its  maturity  to  the 
person  who  shall  then  be  the  bearer.  The  production  of  the  note  by 
the  plaintiff  is  therefore  evidence  of  his  title;  and,  accompanied  as 
it  was  in  the  present  case  with  proof  that  the  plaintiff  had  become 
the  owner  of  the  note  by  purchase  before  it  became  due,  established 
a  conclusive  right  to  recover  against  the  defendant. 

The  indorsement  of  a  third  person,  directing  the  payment  of  the 
note  to  be  made  to  the  order  of  another,  did  not  change  the  contract 
of  the  promisor,  or  enable  him  to  set  up  in  defence  that  the  plaintiff's 
title  was  imperfect,  merely  because  he  had  not  obtained  the  signature 
of  the  person  to  whom  some  intermediate  holder  had  ordered  the  note 
to  be  paid.  Wilbour  v.  Turner,  5  Pick.  526;  Wayman  v.  Bend, 
1  Camp.  175;  Story  on  Notes,  §  133. 

Exceptions  overruled. 


BROWN  V.  THE  BUTCHERS'  AND  DROVERS'  BANK. 

Supreme  Court  of  New  York,  May,  1844.     6  Hill,  443. 

By  the  law  merchant,  the  indorsement  need  not  be  in  the  name  of  the  indorser ;  any 
anbstitute  therefor,  intended  as  an  indorsement,  will  be  given  that  effect.^ 

Writ  of  error.  Brown,  the  defendant  below,  was  sued  as  indorser 
of  a  bill  of  exchange,  upon  which  were  the  figures  "  1,  2,  8,"  in  pencil. 
There  was  evidence  strongly  tending  to  show  that  the  figures  were 
in  Brown's  hand,  and  that  he  intended  thereby  to  bind  himself  as 
an  indorser;  though  it  was  also  proved  that  he  could  write.  The 
judpe  charged  that  if  this  evidence  was  believed,  the  jury  must  find 
for  the  plaintiff.  The  defendant  excepted.  Verdict  and  judgment  for 
the  plaintiff. 

[Argument  not  reported.] 

1  N.  I.  L.  §§  48.  60. 


TAYLOR  V.   BINNET.  169 

Nelson,  C.  J.  It  has  been  expressly  decided  that  an  indorsement 
written  in  pencil  is  sufficient.  Geary  v.  Physic,  5  Barn.  &  Cress.  234 ; 
and  also  that  it  may  be  made  by  a  mark.  George  v.  Surrey,  Mood.  & 
Malk.  516.  In  a  recent  case  in  the  King's  Bench,  it  was  held  that  a 
mark  was  a  good  signing  within  the  Statute  of  Frauds;  and  the 
court  refused  to  allow  an  inquiry  into  the  fact  whether  the  party 
could  write,  saying  that  would  make  no  difference.  Baker  v.  Den- 
ning, 8  Adol.  &  Ellis,  94.  And  see  Harrison  v.  Harrison,  8  Ves.  185 ; 
Addy  V.  Grix,  8  Ves.  54. 

These  cases  fully  sustain  the  ruling  of  the  court  below.  They 
show,  I  think,  that  a  person  may  become  bound  by  any  mark  or  desig- 
nation he  thinks  proper  to  adopt,  provided  it  be  used  as  a  substitute 
for  his  name,  and  he  intend  it  to  bind  himself. 

Judgment  affirmed. 


TAYLOR   V.   BINNEY. 

Supreme  Court  of  Massachusetts,  June,  1811.    7  Mass.  479. 

What  constitutes  indorsement  is  to  be  determined  by  the  law  merchant;  a  guaranty 
written  on  the  back  of  a  negotiable  instrument  is  not  indorsement. 

The  plaintiff  declared  upon  a  promissory  note,  dated  April  26, 
1805,  subscribed  by  one  Fales,  and  payable  to  the  defendant  or  his 
order  in  six  months  with  interest;  and  avers  an  indorsement  and 
guaranty  thereof  by  the  defendant  to  the  plaintiff,  and  due  diligence 
to  collect  the  same  of  the  promisor,  and  notice  to  the  defendant  of  the 
promisor's  failure  of  payment,  etc. 

At  the  trial  which  was  had  before  Sewall,  J.,  upon  the  general 
issue,  the  plaintiff  gave  in  evidence  the  note  declared  on,  and  an 
indorsement  ^  made  and  signed  by  the  defendant  in  these  words : 
"  Dec.  13th,  1805.  I  guarantee  the  payment  of  the  within  note  in 
eighteen  months,  provided  it  cannot  be  collected  of  the  promisor 
before  that  time."  There  was  also  another  indorsement  ^  upon  the 
note  in  these  words:  "April  15th,  1806,  received  one  hundred  dol- 
lars." The  plaintiff  also  gave  in  evidence  an  action  commenced  in 
his  name  against  the  said  Fales,  upon  the  note  now  declared  on,  by 
a  writ  tested  January  20,  1807,  and  served  the  28th  of  the  same 
month;  also  an  execution  tested  September,  1807,  upon  a  judgment 
recovered  in  that  suit,  and  a  return  upon  the  execution  by  a  deputy 
sheriff  for  the  county  of  Lincoln,  dated  the  27th  of  November,  1807, 
that  after  diligent  search  for  the  body  and  property  of  the  said  Fales, 
finding  neither  in  his  precinct,  he  returned  the  execution  in  no  part 
satisfied. 

1  Indorsement  is  here  used  to  denote  a  •writing  on  the  back  of  the  paper,  not  in  the 
technical  sense. 


170  indoeser's  contract. 

The  defendant  then  proved  that  in  April,  1806,  the  note  declared 
on,  with  the  indorsement  thereon,  was  in  the  hands  of  Jacob  Thomp- 
son, who  then  commenced  an  action  in  his  own  name  upon  the  said 
note,  against  the  said  Fales,  upon  which  a  quarter  part  of  a  sloop, 
of  which  Fales  was  master,  was  attached  and  holden  by  Will.  Bell,  a 
deputy  sheriff,  as  the  property  of  the  said  Fales;  and  that  the  said 
Thompson  afterwards  withdrew  the  said  suit,  and  relinquished  the 
attachment,  upon  receiving  from  the  said  Fales  the  sum  of  $100, 
then  indorsed  upon  the  said  note,  which  sum  was  paid  by  Samuel 
Hastings,  who  purchased  the  said  Fales's  quarter  part  of  said  sloop 
at  the  sum  of  $400 ;  but  upon  some  difficulty  which  occurred  in  the 
transfer,  refused  to  advance  more  than  a  quarter  part  of  the  pur- 
chase money;  and  afterwards  paid  to  the  seamen  belonging  to  the 
vessel  $223.40,  and  to  the  said  Bell  the  sum  of  $23  for  expenses  and 
costs  of  suit.  The  defendant  also  proved  that  the  plaintiff  was  pres- 
ent at  the  transaction  between  Thompson  and  Fales,  when  the  said 
suit  and  attachment  were  relinquished,  and  immediately  received  the 
note  of  the  said  Thompson;  and  there  was  no  evidence  of  any  con- 
sideration paid  for  the  note  by  the  plaintiff. 

Upon  this  evidence  the  judge  who  sat  in  the  trial,  directed  a  non- 
suit, upon  the  ground,  1st,  That  the  plaintiff  had  not  proved  a  title 
in  himself  to  recover  upon  the  said  guaranty;  and,  2d,  If  he  had 
proved  such  title,  that  the  guaranty  was  discharged,  and  the  defend- 
ant no  longer  liable  upon  it,  after  the  said  suit  and  attachment  were 
relinquished  by  the  said  Thompson,  the  former  holder  of  the  note; 
especially  as  the  plaintiff  was  present  at  that  transaction,  and  fully 
informed  of  the  state  of  the  note  when  it  came  to  his  hands.  The 
nonsuit  was  entered,  subject  to  the  opinion  of  the  court  upon  the 
report  of  the  judge,  with  liberty  to  the  nlaintiff  to  move  for  a  new 
trial. 

[Argument  not  reported.] 

The  action  being  continued  nisi  for  advisement,  the  opinion  of  the 
court  was  delivered  in  Suffolk,  at  an  adjournment  of  the  March  term 
in  that  county,  by 

Sew  ALL,  J.  The  plaintiff  having  been  nonsuited,  with  liberty  to 
move  for  a  new  trial,  the  report  of  the  evidence,  upon  which  the  non- 
suit was  directed,  has  been  considered  by  the  court. 

In  the  argument  upon  the  motion  for  a  new  trial  two  questions 
have  been  discussed:  whether  the  plaintiff  has  entitled  himself  to 
an  action  in  his  own  name,  upon  the  indorsement  and  guaranty  of 
the  defendant?  And  whether,  if  so  entitled,  the  defendant  is  dis- 
charged of  all  responsibility  upon  his  indorsement;  considering  the 
conduct  of  Thompson,  the  former  holder,  and  of  the  plaintiff,  respect- 
ing the  collection  of  this  note  from  Fales,  the  promisor? 


TAYLOR  V.   BINNEY.  171 

The  three  justices  present  at  the  argument  are  agreed  in  deciding 
for  the  defendant  upon  the  first  question;  and  a  decision  of  the 
second  question  has  therefore  been  thought  unnecessary. 

It  is  an  established  rule,  respecting  the  negotiation  of  bills  of 
exchange  and  promissory  notes,  that  a  bill  or  note  payable  to  order 
is  transferable  only  by  indorsement;  and  what  is  said  of  a  transfer 
by  delivery,  after  a  blank  indorsement,  is  not  inconsistent  with  this 
rule  but  when  explained  by  the  usage,  is  entirely  conformable.  The 
usage  in  this  particular  is,  that  after  an  indorsement  in  blank  by  the 
payee,  or  any  subsequent  indorser,  it  is  competent  for  tlie  holder  of 
the  bill  or  note  to  make  himself  the  immediate  indorsee,  and  to  claim 
by  the  blank  indorsement.  And  to  maintain  an  action  upon  the  bill 
or  note,  the  holder  completes  the  indorsement,  by  writing  an  assign- 
ment or  order  of  payment  to  himself  over  the  name  of  the  indorser, 
which  in  the  usual  course  of  business  constitutes  a  blank  indorsement. 
Chitty  on  Bills,  58,  59,  101,  106,  117;  Doug.  633,  Peacock  v.  Ehodes 
&  ah;  1  Johns.  N.  Y.  Rep.  143,  Cock  v.  Fellows;  4  D.  &  E.  28, 
Mead  v.  Young. 

In  the  case  at  bar,  the  plaintiff  relies  on  an  indorsement  which  is 
not  blank  in  the  form  of  it,  but  completed  by  the  indorser  himself. 
The  note,  with  the  words  of  the  payee  in  his  indorsement,  are  to  be 
construed  together  as  one  written  instrument.  The  special  guarant}^, 
expressed  in  that  indorsement,  is  the  whole  ground,  upon  which  the 
present  action  against  this  defendant  can  be  maintained ;  and  the 
plaintiff  does  not  rely  upon  any  implied  responsibility,  resulting  from 
an  indorsement  in  the  common  form.  If  this  indorsement,  in  the 
whole  tenor  of  it,  may  be  construed  to  be  not  only  a  guaranty  but  also 
a  transfer  and  assignment  of  the  note,  which  seems  to  have  been 
the  intention  and  understanding  of  the  parties,  the  principal  objec- 
tion to  the  title  of  the  plaintiff  remains  in  force.  There  is  no  name 
inserted  of  the  party  to  be  entitled  by  the  indorsement;  and  if  this 
omission  might  be  supplied  by  extraneous  evidence,  the  facts  proved 
in  the  case  render  it  certain  that  the  present  plaintiff  was  not  the 
party  to  the  guaranty  or  assignment  when  it  was  made;  and  no  evi- 
dence has  been  offered  of  any  subsequent  privity  or  assent  between 
him  and  the  defendant. 

But  the  argument  of  the  plaintiff  is,  that  the  omission  of  the  name 
of  the  indorsee  is  evidence  of  an  intention  in  the  defendant  and  the 
other  immediate  party,  whoever  he  was,  to  give  an  unlimited  cur- 
rency to  this  note,  and  to  accompany  it  with  the  collateral  promise  of 
the  payee,  according  to  the  usage  and  construction  in  ordinary  cases 
of  blank  indorsements  upon  negotiable  bills  or  notes.  But  in  the 
case  at  bar  there  is  no  necessary  implication  to  this  effect,  arising 
from  the  circumstance  of  the  omission  of  the  name  of  the  indorsee 
or  party  to  the  guaranty.  This  may  have  been  a  mistake  or  acci- 
dent.   The  negotiation  was  not  upon  the  credit  of  the  original  prom- 


172  indorser's  contract. 

isor,  but  wholly  upon  the  final  responsibility  of  the  indorser;  the 
ability  of  the  promisor,  considering  the  whole  tenor  of  this  indorse- 
ment, remaining  at  his  risk;  and  the  assignment  seems  to  be  rather 
a  confidence  for  the  collection  of  the  note,  than  an  absolute  transfer 
of  the  property.  The  guaranty  taken  independently  of  the  note  is 
a  promise  not  negotiable,  being  conditional,  and  not  absolute;  and 
connected  with  it,  the  supposition  is  altogether  unreasonable  and 
improbable  of  an  unlimited  currency  intended  for  the  note  itself  at 
the  risk  of  the  indorser.  Chitty,  88 ;  Com,  Dig.  title  Merchant,  F.  16 ; 
8  Mod.  Eep.  363,  Morice  v.  Lee. 

The  plaintiff  fails  therefore  in  the  evidence  necessary  to  his  title 
even  admitting  the  usage  cited  respecting  notes  indorsed  in  blank  to 
have  any  application  where  the  indorsement  is  full  and  restrictive, 
and  not  at  all  in  the  form  of  a  blank  indorsement,  unless  in  the  mere 
circumstance  of  omitting  the  name  of  the  indorsee. 

The  nonsuit  is  confirmed,  and  judgment  is  to  be  entered  upon  it 
for  the  defendant. 

NoTK.  —  The  authorities  are  in  conflict  as  to  the  effect  of  an  assignment 
or  guaranty  written  on  the  back  of  a  negotiable  instrument  by  the  holder, 
some  holding  that  any  writing  which  purports  to  transfer  title  to  the  instru- 
laent  is  indorsement.  See  Adams  v.  Blethen,  66  Me.  19 ;  Markey  v.  Corey, 
108  Mich.  184  (cases  of  assignment);  Partridge  v.  Davis,  20  Vt.  499 
(guaranty).    But  see  Bigelow,  Bills  and  Notes,  93,  94. 


LEAVITT    V.   PUTNAM. 

Court  of  Appeals  of  New  York,  July,  1850.     3  Comst.  494. 

A  special  indorsement  is  one  which  specifies  the  person  to  whom  the  instrument  is 
to  be  pa_vable.i 

A  negotiable  instrument  may  be  indorsed  after  maturity .* 

The  case  is  stated  in  the  opinion  of  the  court. 

[Argument  reported.] 

HuRLBUT,  J.  On  the  29th  day  of  August,  1844,  Messrs.  J.  W.  and 
R.  Leavitt  made  their  note  for  $1570.53,  payable  to  the  order  of 
T.  Putnam  &  Co.  (the  defendants),  eight  months  after  date-.  A  few 
days  after  the  maturity  of  the  note,  the  defendants  indorsed  it  as 
follows:  "Pay  the  within  to  A.  Thacher,  value  received,  May  21, 
1845.  T.  Putnam  &  Co."  Thacher  indorsed  without  recourse,^  and 
delivered  the  note  for  a  valuable  consideration  to  the  American 
Exchange  Bank,  in  whose  behalf  this  action  is  brought. 

1  N.  I.  L.  §  51.  2  Id.  §  64.  8  Id.  §  55,  of  qualified  indorsement. 


LEAVITT  V.   PUTNAM.  173 

On  the  trial,  the  defendants  urged,  among  other  grounds  of  objec- 
tion to  the  plaintiff's  recovery,  that  the  defendants'  indorsement  was 
in  effect  a  new  draft  payable  to  Thacher  only,  and  not  negotiable,  so 
that  no  action  could  be  maintained  upon  it  in  the  name  of  the  plain- 
tiff. In  this  they  were  sustained  by  the  court,  and  the  plaintiff  was 
nonsuited. 

The  other  objections  taken  by  the  defendants  on  their  motion  for  a 
nonsuit  were  not  considered  by  the  court  below,  and  under  the  cir- 
cumstances of  the  case  cannot  be  noticed  on  this  appeal ;  so  that  the 
only  thing  for  us  to  consider  is,  whether  the  indorsement  of  a  note 
made  after  due  differs  from  one  made  before  maturity  in  respect  to 
its  negotiability.  It  was  conceded  on  the  argument  that  no  express 
authority  could  be  found  sustaining  the  distinction  upon  which  the 
decision  of  the  Superior  Court  was  based ;  but  it  was  urged  that  the 
defence  could  be  sustained  upon  the  principle  that  a  dishonored  note 
loses  its  mercantile  character,  and  its  indorsement  becomes  an  orig- 
inal contract  which  must  be  made  expressly  negotiable  in  terms,  or 
it  could  not  be  held  to  possess  the  character  of  negotiability.  There 
is  unquestionably  a  difference  between  the  indorsement  of  a  note 
after  due  and  one  while  it  is  running  to  maturity,  but  this  relates 
only  to  a  single  point  arising  from  the  necessity  of  the  case ;  to  wit, 
the  time  of  payment,  which,  in  the  latter  indorsement,  is  fixed  at 
a  future  day  by  the  express  agreement  of  the  parties,  while  in  the 
former  it  is  declared  by  law  to  be  within  a  reasonable  time,  upon 
demand.  But  in  all  other  respects  the  contract  is  the  same  as  an 
indorsement  in  the  usual  course  of  trade;  and  it  is  difficult  to  per- 
ceive how  the  single  difference  referred  to  can  at  all  affect  the  nego- 
tiability of  the  indorsement.  A  bill  or  note  does  not  lose  its  negotiable 
character  by  being  dishonored.  If  originally  negotiable  it  may  still 
pass  from  hand  to  hand  ad  infinitum  until  paid  by  the  drawer. 
Moreover,  the  indorser  after  maturity  writes  in  the  same  form,  and 
is  bound  only  upon  the  same  condition  of  demand  upon  the  drawer 
and  notice  of  non-payment  as  any  other  indorser.  Thus  the  paper 
preserves  its  mercantile  existence  and  retains  the  main  attributes 
of  a  proper  bill  or  note,  and  circulates  as  such  in  the  commercial 
community.  Exceptions  to  a  general  rule  affecting  so  important  and 
numerous  a  class  of  transactions  as  the  one  under  consideration  must 
be  productive  of  great  inconvenience,  and  will  not  be  indulged  except 
for  urgent  reasons;  and  nothing  has  been  made  to  appear  in  the 
argument  or  seems  to  exist  in  the  case,  which  warrants  the  court  in 
treating  the  ordinary  indorsement  of  a  dishonored  bill  or  note  as  with- 
out the  law  merchant  and  not  negotiable.  While  it  was  questioned 
whether  such  a  note  was  negotiable,  and  whether  the  indorser  was 
chargeable  except  upon  the  usual  condition  of  demand  and  notice, 
there  was  perhaps  reason  enough  to  sustain  the  decision  of  the  court 
below.    But  since  both  the  note  and  its  indorsement,  by  a  long  course 


174  indorser's  contract. 

of  decisions,  have  been  treated  as  within  the  law  merchant  in  respect 
to  their  main  attributes,  the  indorsement  ought  to  be  regarded  as 
negotiable  to  the  same  extent  as  an  indorsement  before  maturity. 
The  latter  follows  the  nature  of  the  original  bill,  and  is  equally  ne- 
gotiable. Edie  V.  The  East  India  Co.,  2  Burr.  1216;  Mutford  v. 
Walcot,  1  Ld.  Eayro.  574;  Allwood  v.  Hazelton,  2  Bailey  (S.  C), 
457;  Bishop  v.  Dexter,  2  Conn.  419;  Berry  v.  Eobinson,  9  Johns. 
121. 

The  note  in  the  present  case  was  upon  its  face  transferable,  and  its 
character  in  respect  to  negotiability  could  only  have  been  changed 
by  an  indorsement  containing  express  words  of  restriction.  The 
defendants'  indorsement  was  a  full  one,  containing  the  name  of  the 
person  in  whose  favor  it  was  made,  but  omitting  the  words  "  or 
order,"  the  legal  effect  of  which  was,  nevertheless,  to  make  the  note 
payable  to  him  or  his  order,  and  his  indorsement  therefore  was 
effectual  to  transfer  the  note  to  the  plaintiff.  Chitty,  Bills,  136; 
Story,  Prom.  Notes,  §  139. 

I  am  of  opinion  that  the  judgment  of  the  Superior  Court  should 
be  reversed,  and  a  new  trial  awarded. 

Judgment  reversed. 


WALKEE   V.   MACDONALD. 

Court  of  Exchequer  of  England,  June,  1848.     2  Exch.  526. 

A  blank  indorsement  does  not  specify  to  whom  the  instrument  is  to  be  payable ;  its 
effect  is  to  make  the  instrument  payable  to  bearer.^ 

This  was  an  action  of  debt  by  the  indorsees  against  the  indorser 
of  a  bill  of  exchange,  dated  the  21st  of  October,  1846,  and  drawn 
by  E.  Bliss  upon,  and  accepted  by  J.  Williams,  for  payment  to  the 
order  of  E.  Bliss  of  £86  18s.  4:d.,  four  months  after  date.  The 
declaration  stated  that  E.  Bliss  indorsed  the  bill  to  J.  Crowley  &  Co. ; 
that  J.  Crowley  &  Co.  indorsed  the  bill  to  S.  F.  Stephens;  that 
S.  F.  Stephens  indorsed  it  to  Bartlett,  Perrott,  &  Co. ;  that  Bartlett, 
Perrott,  &  Co.  indorsed  it  to  the  defendant ;  and  that  the  defendant 
indorsed  it  to  the  plaintiffs.  The  defendant  pleaded,  first,  a  denial 
of  the  indorsement  by  him  to  the  plaintiffs;  secondly,  a  traverse  of 
presentment  for  payment ;  and  thirdly,  no  notice  of  dishonor. 

The  cause  came  on  for  trial  before  Parke,  B.,  at  the  Middlesex 
Sittings  in  Trinity  Term,  1847,  when  a  verdict  was  found  for  the 
plaintiffs  for  the  amount  of  the  bill  and  interest,  subject  to  the 
opinion  of  the  court  upon  the  following  case : 

1  N,  L  L.  §§  51,  65. 


WALKER  V.   MACDONALD.  175 

The  plaintiffs  produced  and  read  at  the  trial  the  bill  of  exchange 
mentioned  in  the  pleadings,  and  which  was  as  follows: 

"  86Z.  18s.  4i. 

London,  21st  October,  1846. 

Four  months  after  date  pay  to  my  order  eighty-six  pounds,  eigh- 
teen shillings,  and  fourpence,  value  received. 

(Per  pron.)  Edvtin  Bliss. 

Chas.  Jeffrys. 
To  Mr.  John  "Williams,  brushmaker,  Cheltenham." 

The  indorsements  were  as  follows: 

"  Per  proc.  Edwin  Bliss,  Charles  Jeffrys ;  James  Crowley  &  Co. ; 
Samuel  F.  Stephens;  Bartlett,  Perrott,  &  Co. 

Pay  Messrs.  Barker  and  AValker  &  Co.,  or  order;  W.  Macdonald. 
Barher  and  Walker  &  Co.  Per  proc.  of  the  Eastwood  Company; 
Thomas  Goodwill.  Per  proc,  Nottingham  and  Notts  Banking 
Company;    Ade.  Lasalle,  pro  manager. 

Pay  Messrs.  Omerod  &  Hardcastle  or  order:  Elliott  &  Gragg. 
Omerod  &  Hardcastle." 

The  above  indorsement,  in  the  name  of  *' Barber  and  Walker  & 
Co.,"  was  not  on  the  bill  prior  to  or  at  the  time  when  it  was  pre- 
sented for  payment,  but  was  written  on  the  bill  afterwards,  under 
the  circumstances  hereinafter  stated.  The  bill  of  exchange  in  ques- 
tion was  drawn  and  indorsed  as  mentioned  in  the  declaration,  and 
was,  previously  to  its  being  presented  for  pa}Tnent  as  hereinafter 
mentioned,  accepted  by  the  drawee,  payable  at  the  London  and  "West- 
minster Bank.  The  indorsement  by  the  defendant  to  the  plaintiffs 
was  a  special  indorsement  in  the  words  and  figures  following: 
"  Pay  Messrs.  Barber  and  Walker  &  Co.,  or  order.  W.  Macdonald." 
"When  the  bill  became  due  it  was  in  the  hands  of  Messrs.  Jones  Lloyd, 
&  Co.,  bankers,  of  London,  as  holders  thereof.  The  bill  was  pre- 
sented on  their  behalf  for  payment,  when  due,  at  the  London  and 
Westminster  Bank,  and  payment  was  refused  by  such  bank,  the 
answer  then  given  by  them  being  "  No  advice,"  which  is  the  usual 
answer  when  country  bills  are  refused  payment,  and  that  answer 
was  given  at  once,  without  referring  to  the  indorsements.  At  the 
time  of  such  presentment  the  indorsement  "  Barber  and  Walker  & 
Co."  was  not  on  the  bill,  but  that  indorsement  was  placed  thereon 
under  the  circumstances  hereinafter  stated;  all  the  other  indorse- 
ments above  set  out  were  on  the  bill  at  the  time  of  the  said  pre- 
sentment. .  .  .  Due  notice  of  dishonor  was  given  to  the  defendant 
by  the  plaintiffs,  and  in  due  time.  The  defendant  afterwards  sent 
a  letter  to  the  plaintiffs,  requesting  them  to  write  the  indorsement 
of  "Barber  and  Walker  &  Co."  on  the  bill.     The  plaintiffs,  after 


176  indorser's  contract. 

receipt  and  in  consequence  of  that  letter,  wrote  the  indorsement  of 
"  Barber  and  Walker  &  Co."  on  the  bill,  in  the  manner  in  which  the 
same  now  appears,  as  stated  in  this  case,  and  immediately  returned 
the  bill  to  the  defendant,  who  thereupon  returned  the  same  to  the 
plaintiffs.  The  plaintiffs  proved  that  they  were  the  parties  consti- 
tuting the  firms  of  Barber  and  Walker  &  Co.  and  the  Eastwood  Co., 
and  that  Thomas  Goodwill,  who  indorsed  for  the  plaintiffs  under 
the  name  of  the  Eastwood  Co.,  was  authorized  so  to  indorse.  .  .  . 

The  question  for  the  opinion  of  the  court  is,  whether  the  pre- 
sentment of  the  bill,  indorsed  as  above  stated,  was  sufficient  as  against 
the  defendant,  and  whether  the  defendant  is  liable  to  the  present 
plaintiffs,  under  the  circumstances  in  this  action.  If  the  court 
shall  be  of  opinion  in  the  affirmative,  the  verdict  for  the  plaintiffs 
is  to  stand  for  the  amount  of  the  principal  and  interest  until  final 
judgment.  If  the  court  shall  be  of  opinion  in  the  negative,  a  non- 
suit is  to  be  entered;  and  either  party,  with  the  consent  of  the 
court,  is  to  be  at  liberty  to  convert  this  case  into  a  special  verdict. 

Cur.  adv.  vult. 

[Argument  reported.] 

Pollock,  C.  B.  This  was  an  action  upon  a  bill  of  exchange, 
brought  against  the  defendant,  by  whom  it  had  been  specially  in- 
dorsed. Before  that  indorsement  the  bill  had  been  indorsed  in 
blank,  and  was  therefore  payable  to  bearer.  It  was  decided,  in 
the  case  of  Smith  v.  Clarke,  1  Peake,  N.  P.  C.  295,  that  when  a 
bill  has  been  so  indorsed,  and  is  payable  to  bearer,  no  subsequent 
holder  can  restrain  its  negotiability.  That  decision  has  always  been 
considered  to  be  a  correct  one,  and  has  constantly  been  acted  on. 
In  the  present  case,  the  bill  in  question  was  indorsed  to  the  plaintiffs 
specially;  they  indorsed  it  under  another  name  of  the  firm,  but 
that  name  did  not  correspond  with  the  name  in  which  the  bill  was 
indorsed  to  them.  The  bill  was  presented,  and  the  answer  was 
"  No  advice."  Notice  of  the  dishonor  of  the  bill  was  given  to  the 
defendant,  and  then  this  action  was  brought  against  him.  The 
pleas  are,  first,  a  denial  of  the  indorsement.  There  is  no  doubt 
the  indorsement,  as  laid,  was  proved,  and  therefore  that  plea  offers 
no  defence.  The  defence,  if  any,  in  truth  arises  upon  the  second 
plea,  which  is  a  denial  of  the  presentment  of  the  bill  for  payment. 
The  question,  therefore,  is,  whether  the  acceptor  was  bound  to  pay 
the  bill  upon  that  presentment;  and  we  are  all  clearly  of  opinion 
that  he  was  so  bound.  Upon  referring  to  the  cases,  we  find  that  of 
Leonard  v.  Wilson,  2  Cr.  &  M.  589,  to  be  expressly  in  point.  The 
presentment  in  the  plea,  as  was  stated  by  my  Brother  Alderson,  in 
the  course  of  the  argument,  must  be  a  presentment  which  will,  upon 
the  bill  being  dishonored,  make  the  defendant  liable  on  his  indorse- 


WHITE   V.   NATIONAL  BANK.  177 

ment  to  the  plaintiffs.  Wliat,  then,  is  the  promise  to  the  plaintiffs? 
The  promise  is,  that  the  indorser  will  pay  to  the  indorsee,  and  those 
claiming  under  him,  if  the  acceptor  does  not  pay  to  a  person  entitled 
to  call  on  him  for  payment  of  the  bill  when  due.  Here  the  present- 
ment was  by  the  holder,  and  the  holder  was  entitled  to  claim  from 
the  acceptor.  Upon  the  authority,  therefore,  of  the  case  decided  in 
this  court,  and  from  the  universally  received  opinion  on  this  matter, 
we  are  all  of  opinion  that  our  judgment  must  be  for  the  plaintiffs. 
I  may  add,  that  I  am  not  only  stating  what  is  the  opinion  of  all  the 
court  who  heard  the  arguments,  but  also  that  of  my  Brother  Parke, 
who  tried  the  cause.  As  we  entertain  no  doubt  whatever  upon  the 
matter,  and  as  the  sum  in  dispute  is  so  small  that  it  would  be  ab- 
sorbed by  any  further  litigation,  our  judgment  will  be  simply  for 
the  plaintiffs,  and  there  will  be  no  special  verdict. 

Judgment  for  the  plaintiffs. 


i 


WHITE    V.    NATIONAL   BANK. 

Supreme  Court  of  the  United  States,  October,  1880.     102  U.  S.  658. 

An  indorsement  which  constitutes  the  indorsee  the  agent  of  the  indorser  for  col- 
lection is  restrictive,  and  passes  no  title  as  against  the  indorser.^ 

The  case  is  stated  in  the  opinion. 
[Argument  not  reported.] 

Mr.  Justice  Miller.  This  is  an  action  by  White,  who  was  plaintiff 
below,  for  the  sum  of  $60,000,  against  the  Miner's  National  Bank 
of  Georgetown,  Colorado.  The  declaration  contains  twelve  special 
counts,  upon  as  many  drafts,  drawn  by  the  Stewart  Silver  Eeducing 
Company  on  Thomas  W.  Phelps,  payable  in  the  city  of  New  York  to 
the  order  of  the  defendant,  and  indorsed  by  J.  L.  Brownell,  its 
p'resident,  to  S.  V.  White,  and  duly  protested  for  non-payment. 

To  these  counts  is  added  another,  in  this  language :  "  And  for 
that  also,  heretofore,  to  wit,  on  the  first  day  of  April,  a.  d.  1876,  at 
the  said  county  of  Clear  Creek,  the  said  defendant  was  indebted  to 
plaintiff  in  $60,000,  for  so  much  money  by  the  plaintiff,  before  that 
time,  paid  to  the  use  of  said  defendant  at  its  request,  which  said 
sum  of  money  was  to  be  paid  to  the  plaintiff  on  request,"  with  an 
allegation  of  request  and  refusal. 

To  this  declaration  the  defendant  pleaded  the  general  issue  and 
several  special  pleas,  which  it  is  unnecessary  to  notice. 

The  case  was  tried  by  a  jury.     The  plaintiff  recovered  $15,000 

1  N.  L  L.  §§  53,  54. 
12 


178  INDORSEU'S  CONTRACT. 

debt,  and  $2625  damages  for  interest,  on  account  of  three  of  the 
drafts.  His  claim  on  the  other  drafts,  and  for  money  paid  at  de- 
fendant's request,  was  rejected.  He  therefore  brings  this  writ,  and 
assigns  for  error  the  rulings  of  the  court  in  the  progress  of  the  trial, 
which  are  set  forth  in  a  bill  of  exceptions. 

J.  L.  Brownell,  a  partner  in  the  firm  of  J,  L.  Brownell  &  Brother, 
doing  business  as  bankers  and  brokers  in  the  city  of  New  York,  was 
also  president  of  the  defendant,  and  interested  in  the  Stewart  Silver 
Reducing  Company  during  the  time  of  the  transactions  involved  in 
this  suit.  As  such  president,  he  sold  or  transferred  the  several  drafts 
on  which  this  suit  is  founded  to  White,  and  received  of  the  latter 
for  the  use  of  the  bank  the  amount  of  said  drafts  less  the  discount. 
They  were  not  paid  at  maturity,  but  due  demand,  protest,  and  notice 
were  made.  Those  on  which  plaintiff  recovered  need  not  be  further 
noticed.  The  others  were  rejected  by  the  court  as  evidence  against 
the  defendant,  on  account  of  the  form  of  the  indorsement. 

As  they  were,  in  this  respect,  alike,  the  form  of  one  will  be  given 
here  as  a  specimen  of  the  whole : 

"  $5000. 

Office  of  the  Stewart  Silver  Eeducing  Company, 
[l.  s.]  Georgetown,  Col.,  Oct.  25,  1875. 

Four  months  after  date  pay  to  the  order  of  the  Miners'  National 
Bank,  Georgetown,  Colorado,  payable  at  the  Third  National  Bank, 
New  York  City,  five  thousand  dollars. 

Stewart  Silver  Eeducing  Company, 

By  J.  Oscar  Stewart,  President. 
To  Thos.  W.  Phelps,  Esq., 

Georgetown,  Colorado." 

Across  the  face,  in  red :   "  Accepted.    Thos.  W.  Phelps." 
Indorsed : 

"  No.  .  Pay  S.  V.  White  or  order  for  account  Miners'  National 
Bank,  Georgetown,  Colorado.    J.  L.  Brownell,  p't. 

S.  V.  White." 

Because  of  the  words  "  for  account  of  Miners'  National  Bank  of 
Georgetown,  Colorado,"  in  this  indorsement  by  Brownell,  as  presi- 
dent of  the  bank,  the  Circuit  Court  ruled  that  there  arose  out  of 
the  transaction  no  obligation  on  the  part  of  the  bank  to  pav  the 
draft  or  return  the  money,  although  due  demand  of  the  acceptor 
and  refusal  to  pay  was  proved,  with  notice  to  the  bank.  This  is  the 
principal  question  which  we  are  to  decide. 

The  plaintiff  relies  largely  on  two  propositions  to  establish  his 
right  to  recover  against  defendant  on  this  indorsement. 


WHITE   V.   NATIONAL   BANK.  179 

The  first  of  these  is  that  these  words  are  merely  director}'  and 
capable  of  explanation,  and  when  it  is  shown  by  parol  testimony, 
as  in  this  case,  that  the  plaintiff  bought  and  paid  full  value  for  the 
draft,  with  the  understanding  that  he  was  buying  it  as  commercial 
paper,  with  the  usual  incidents  of  such  a  transaction,  the  indorser  is 
liable  in  the  usual  manner,  notwithstanding  the  words  we  have 
quoted. 

The  other  proposition  is  that  such  is  the  custom  of  bankers  who 
deal  in  such  paper  in  New  York,  where  these  drafts  are  payable, 
and  that  the  custom  must  control  the  construction  of  the  contract. 

"We  are  not  satisfied  that  either  of  these  propositions  is  sound. 

The  language  of  the  indorsement  is  without  ambiguity,  and  needs 
no  explanation,  either  by  parol  proof  or  by  resort  to  usage.  The 
plain  meaning  of  it  is,  that  the  acceptor  of  the  draft  is  to  pay  it  to 
the  indorsee  for  the  use  of  the  indorser.  The  indorsee  is  to  receive  it 
on  account  of  the  indorser.  It  does  not  purport  to  transfer  the 
title  of  the  paper  or  the  ownership  of  the  money  when  received. 
Both  these  remainj  by  the  reasonable  and  almost  necessary  meaning 
of  the  language,  in  the  indorser.  It  seems  to  us  that  the  court  below 
correctly  construed  the  effect  of  the  indorsement  to  be  to  make 
White  the  agent  of  the  bank  for  the  collection  of  the  money. 

If  this  be  a  sound  view  of  the  legal  effect  of  the  written  in- 
dorsement, neither  parol  proof  nor  custom  can  be  received  to  con- 
tradict it. 

But  we  are  aware  of  the  necessity  of  proceeding  with  great  cau- 
tion in  a  case  of  first  impression  in  regard  to  questions  affecting 
commercial  transactions,  and  we  do  not,  therefore,  decide  this  one, 
because  we  do  not  think  it  absolutely  necessary  to  the  case.  For 
assuming  this  to  be  correct,  we  think  the  plaintiff  was  still  entitled 
to  recover  more  than  he  did. 

The  court  below  seems  to  have  paid  but  little  attention  to  the  issue 
on  the  count  for  money  paid  to  the  use  of  defendant. 

It  appears  distinctly  by  the  evidence,  and  is  uncontradicted,  that 
the  money  paid  by  plaintiff  on  account  of  these  drafts  was  placed  to 
the  credit  of  the  defendant  with  its  corresponding  bankers  in  New 
York,  and  paid  out  on  cheques  of  the  defendant,  so  that  there  is  no 
question  that  the  latter  received  the  money.  There  is  also  no  ques- 
tion but  that  plaintiff  thought  he  was  buying  these  drafts  and  that 
they  became  his  property  by  their  delivery  to  him.  It  is  also  evident 
that  Brownell,  the  president  of  the  bank,  thought  he  was  selling  him 
the  drafts,  and  there  is  evidence  that  neither  White  nor  Brownell 
noticed  the  restrictive  words  of  the  indorsement.  But  if  the  court 
below  was  correct  in  holding  that  the  indorsement  —  the  evidence  in 
writing  of  what  the  parties  did  —  only  made  White  the  agent  of  the 
bank,  and  left  the  bank  the  owner  of  the  drafts,  then  both  White 
and  Brownell  were  mistaken,  and  the  money  was  paid  and  received 


180  indorsee's  contract. 

under  a  mutual  mistake.  Tf  \Miite  paid  his  money  as  pureliase- 
nioney  of  the  drafts,  he  paid  it  without  any  consideration,  for  he  did 
not  purchase  the  drafts.  He  only  burdened  himself  with  the  duty  of 
collecting  the  money  for  the  bank,  and  the  bank  received  and  used 
his  money  without  giving  him  any  consideration  for  it.  So,  also,  if 
WTiite  did  not  become  owner  of  the  drafts,  and  if,  when  he  should 
collect  the  money  on  them,  he  would  hold  it,  in  the  language  of  the 
indorsement,  "  for  the  account  of  the  bank,"  the  jury  might  have 
been  left  at  liberty  to  presume  that  the  money  which  he  paid  was  a 
loan  or  advance  on  the  security  of  the  paper  delivered  to  him  at  the 
time.  Either  of  these  views  of  the  transaction  would  justify  a  re- 
covery under  the  money  count,  in  which  the  delivery  of  the  money 
and  the  delivery  of  the  drafts,  with  the  qualified  indorsement,  would 
be  evidence  of  the  payment  and  receipt  of  the  money  and  the  circum- 
stances which  attended  it. 

This  indorsement  is  treated  by  counsel  here  as  an  assignment  of 
the  paper  without  recourse,  in  which  the  title  to  the  paper  passed, 
but  the  right  to  recourse  to  the  assignor  was  cut  off.  But  this  is 
evidently  an  error.  If  the  court  below  was  correct,  neither  the  title  to 
the  paper  nor  the  right  to  the  money  under  it  passed.  The  only 
effect  was  to  justify  the  acceptor  in  paying  to  the  indorsee  for  the 
account  of  the  bank.  The  legal  effect  of  the  transaction,  as  evi- 
denced by  the  writing,  was  merely  to  enable  White  to  collect  the 
money  for  the  bank.  Though  a  restricted  indorsement,  it  was  no 
assignment  at  all.  It  is  not,  therefore,  a  contradiction  or  a  varying 
of  the  meaning  of  the  written  instrument  to  prove  that,  in  the  deliv- 
ery of  this  paper  to  White,  he  and  the  bank  were  under  a  mistake 
as  to  the  effect  of  it,  or  that  he  paid  this  money  to  the  bank  without 
any  consideration,  or  that  he  advanced  money  to  the  bank  in  the  idea 
that  he  was  to  be  reimbursed  out  of  the  draft  when  collected. 

The  instructions  given  by  the  court,  and  the  refusal  of  the  prayer 
of  plaintiff,  fairly  raised  this  question.  All  the  drafts,  except  the 
three  which  had  no  such  indorsement,  were  excluded  from  the  jury. 
The  jury  were  told  that  nothing  else  was  before  them. 

The  thirteenth  instruction  asked  by  plaintiff  and  refused  by  the 
court  distinctly  affirmed  that  if  Brownell  obtained  from  plaintiff 
sums  of  money  on  account  of  the  drafts,  which  the  court  had  refused 
as  evidence,  which  money  was  placed  to  the  credit  of  defendant  in  a 
New  York  bank,  and  afterwards  drawn  by  defendant,  the  defendant 
was  liable  for  such  money. 

The  judgment  will  be  reversed,  and  the  case  remanded  with  direc- 
tions to  set  aside  the  verdict  and  grant  a  new  trial ;  and  it  is 

So  ordered. 

Note.  —  Further  as  to  the  effect  of  an  indorsement  for  collection,  see 
Freeman's  Bank  v.  National  Tube  Works,  151  Mass.  413  and  cases  cited. 


CEIST   V.  CRIST.  181 

CEIST   V.    CRIST. 

Supreme  Court  of  Indiana,  November,  1849.     1  Carter,  570. 

"When  indorsement  is  necessary  to  pass  title,  it  must  be  made  by  the  holder  of  the 
legal  title  to  the  instrument.^ 

The  case  is  stated  in  the  opinion. 
[Argument  not  reported.] 

Blackford,  J.  This  was  an  action  of  debt  brought  by  James  W. 
Crist,  executor  of  George  W.  Crist,  deceased,  against  Christian  Crist. 

The  suit  is  founded  on  two  sealed  notes  for  the  payment  of  money, 
executed  in  December,  1839,  by  the  defendant,  and  payable  to  the 
testator.  There  are  two  special  pleas,  to  which  replications  were 
filed.  The  replications  were  demurred  to  generally,  and  Judgment 
was  rendered  for  the  plaintiff.  It  is  not  deemed  necessary  to  set  out 
the  pleadings  at  length.  Taking  the  allegations  in  the  replications 
to  be  true,  which  we  must  do,  the  facts  may  be  considered  to  be  as 
follows : 

In  1836  George  "W.  Crist,  being  the  owner  in  fee  of  a  certain 
quarter-section  of  land,  made  his  will,  and  devised  the  east  half  of 
said  quarter-section  to  his  son.  Resin  Crist.  The  defendant  after- 
wards purchased  of  Resin  Crist  the  interest  which  the  latter  claimed 
in  the  land  under  the  will,  and  gave  his  notes  for  the  price ;  but  there 
does  not  appear  to  have  been  any  written  evidence  of  such  purchase. 
After  that  purchase,  namely,  in  1839,  George  W.  Crist,  the  devisor, 
sold  said  east  half  of  said  quarter-section  of  land  to  the  defendant, 
and  conveyed  the  same  to  him  in  fee,  receiving  in  payment  from  the 
defendant  the  notes  now  sued  on,  together  with  a  mortgage  on  the 
land  to  secure  the  purchase  money.  Resin  Crist,  who  died  before  his 
father,  left  an  infant  son  named  William  as  his  heir,  who  is  now 
living.  George  W.  Crist  died  on  the  27th  of  March,  1844,  without 
having  altered  his  will,  the  Revised  Statutes  of  1843  being  then  in 
force. 

The  grounds  relied  on  to  defeat  this  suit  were  stated  by  the  de- 
fendant's counsel,  in  their  brief,  to  be  as  follows :  "  First,  these 
notes,  or  the  proceeds  of  the  sale,  belong  to  William  Crist,  the  infant 
son  of  Resin.  Secondly,  the  action  should  have  been  in  the  name  of 
the  infant." 

We  agree  with  the  defendant  that  the  legacy  of  the  notes  and  mort- 
gage, if  there  be  such  a  legacy,  did  not  lapse  by  the  death  of  Resin 
Crist  in  the  lifetime  of  his  father.     By  virtue  of  the  statute  the 

*  It  follows,  as  indorsement  is  necessary  where  the  paper  is  payable  to  the  order  of 
the  decedent,  that  there  must  be  indorsement  by  the  personal  representative  to  the 
legatee,  the  point  to  be  specially  illustrated  here.     See  Bigelow,  Bills  and  Notes,  86. 


182  indorser's  contract. 

lcgacA%  if  any,  passed  to  William  Crist,  the  infant  son  and  heir  of 
I\csin,  as  it  would  have  passed  to  Eesin  himself  had  he  survived  the 
testator.  E,  S.  1843,  p.  489,  §  23.^  But  whether  there  is  in  fact  any 
Buch  legacy  is  another  question.  Previously  to  the  Revised  Statutes 
of  1843  the  testator's  sale  and  conveyance  in  fee  to  the  defendant  of 
the  land,  and  his  taking  of  a  mortgage  on  the  land  to  secure  the 
price,  after  the  execution  of  the  will,  would  have  been  a  revocation 
of  the  will  as  to  said  land.  Adams  v.  Winne,  7  Paige,  97  (1).  The 
defendant  contends,  however,  that  this  rule  is  so  changed  by  the  17th 
sec.  of  chap.  30  of  the  R.  S.  of  1843,  that  the  notes  and  mortgage  in 
question  are  now  to  be  considered,  under  the  circumstances  of  this 
case,  as  specifically  bequeathed  by  the  will.  Whether  this  position 
of  the  defendant  is  correct  or  not  we  shall  not  stop  to  inquire.  Ad- 
mitting, for  the  sake  of  the  argument,  that  William  Crist  is  the 
specific  legatee  of  the  notes  and  mortgage,  that  specific  bequest  is  not 
sufficient,  of  itself,  to  defeat  the  present  action. 

It  was  the  executor's  duty,  by  statute,  to  inventory,  among  other 
things,  all  bonds,  mortgages,  notes,  and  other  securities  for  the  pay- 
ment of  money.  R.  S.  1843,  p.  515.  There  is  also  the  following 
statutory  provision :  "  When  any  mortgagee  of  real  estate,  or  any 
assignee  of  such  mortgagee,  shall  die  without  having  foreclosed  the 
right  of  redemption,  or  recovered  payment  of  the  amount  secured  by 
such  mortgage,  the  mortgaged  premises,  and  the  debt  secured  thereby, 
shall  be  considered  as  personal  assets  in  the  hands  of  his  executor  or 
administrator,  and  shall  be  administered  and  accounted  for  as  such; 
and  such  executor  or  administrator,  as  such,  shall  have  the  same 
right  to  possession  of  the  mortgaged  premises,  and  to  bring  any  suit 
or  action  respecting  the  same,  or  for  the  recovery  of  the  debt  secured 
thereby,  and  to  execute,  discharge,  or  perform  any  duty,  act,  or  power 
contained  in  such  mortgage,  or  in  the  provisions  of  any  law,  as  such 
mortgagee  or  assignee  could  if  he  were  alive."    R.  S.  1843,  p.  573. 

There  can  be  no  doubt,  therefore,  but  that  the  notes  and  mortgage 
before  us,  supposed  by  the  defendant  to  be  specifically  bequeathed,  are 
part  of  the  personal  estate  of  the  testator. 

It  is  well  settled  that  before  any  legatee  of  personal  property  is 
entitled  to  his  legacy,  he  must  have  the  assent  to  it  of  the  executor. 
The  doctrine  is  thus  stated:  "The  whole  personal  property  of  the 
testator  devolves  upon  his  executor.  It  is  his  duty  to  apply  it,  in  the 
first  place,  to  the  payment  of  the  debts  of  the  deceased;  and  he  is 
responsible  to  the  creditors  for  the  satisfaction  of  their  demands,  to 
the  extent  of  the  whole  estate,  without  regard  to  the  testator's 
having,  by  the  will,  directed  that  a  portion  of  it  shall  be  applied  to 
other  purposes.  Hence,  as  a  protection  to  the  executor,  the  law  im- 
poses the  necessity  that  every  legatee,  whether  general  or  specific,  and 
whether  of  chattels  real  or  personal,  must  obtain  the  executor's  assent 

1  Cf.  Rev.  Laws  of  Mass.  c.  135,  §  21. 


CRIST  V.   CRIST.  183 

to  the  legacy  before  his  title  as  legatee  can  be  complete  and  perfect. 
Hence,  also,  the  legatee  has  no  authority  to  take  possession  of  his 
legacy  without  such  assent,  although  the  testator  by  his  will  expressly 
direct  that  he  shall  do  so ;  for  if  this  were  permitted,  a  testator  might 
appoint  all  his  effects  to  be  thus  taken,  in  fraud  of  his  creditors.  It 
follows  from  the  rule  respecting  the  necessity  of  the  executor's  assent, 
that  if,  without  it,  the  legatee  takes  possession  of  the  thing  be- 
queathed, the  executor  may  maintain  an  action  of  trespass  or  trover 
against  him;  so,  although  a  chattel,  real  or  personal,  specifically  be- 
queathed, be  in  the  custody  or  possession  of  the  legatee,  and  the  assets 
be  fully  adequate  to  the  payment  of  the  debts,  he  has  no  right  to 
retain  it  in  opposition  to  the  executor;  by  whom,  in  such  case,  an 
action  will  lie  to  recover  it."    2  Williams  on  Executors,  982,  983. 

If  the  executor  refuse  his  consent  to  a  legacy  without  cause,  the 
legatee  is  entitled  to  relief  in  equity,  2  Williams  on  Executors,  984 ; 
1  Eoper  on  Leg.  573 ;  Elliott  v.  Elliott,  9  Mees.  &  Welsb.  23. 

It  does  not  appear  in  the  case  before  us  that  any  assent  was  ever 
expressly  given  by  the  executor  to  the  legacy  in  question;  nor  are 
there  any  facts  stated  from  which  an  assent  can  be  presumed. 

This  is  a  suit  by  an  executor  on  notes  given  by  the  defendant  to  the 
testator,  the  notes  being  secured  by  a  mortgage  on  real  estate.  The 
defence  is,  that  the  notes  and  mortgage  were  specifically  bequeathed 
to  one  William  Crist,  in  whose  name  the  suit  should  have  been 
brought.  We  have  shown  that  the  notes  and  mortgage  are  part  of 
the  personal  estate  of  the  testator,  and  that,  supposing  them  to  have 
been  specifically  bequeathed  by  him,  they  cannot  be  said  to  be  the 
property  of  the  legatee  until  the  executor  shall  have  consented  to  the 
legacy.    No  such  assent  being  shown,  the  defence  must  fail. 

A  debtor  to  an  estate,  where  the  debt  has  been  specifically  be- 
queathed by  the  testator,  cannot,  before  the  executor  has  assented  to 
the  legacy,  say  to  the  latter,  "  I  will  not  pay  you."  Bank  of  England 
V.  Parsons,  5  Ves.  665. 

Whether,  if  the  executor  had  assented  to  the  legacy,  the  suit  on  the 
notes  should  not  still  be  in  his  name,  we  have  not  examined. 

Per  Curiam.    The  judgment  is 

Affirmed  with  costs. 


184  indorser's  contract. 

DALE   V.    GEAR. 

Supreme  Court  of  Connecticut,  February,  1871.     38  Conn.  15. 

The  effect  of  an  indorsement  as  fixed  by  the  custom  of  merchants  cannot  be  varied 
by  parol  evidence,  if  no  agency.trust,  or  antecedent  equity  existed  between  the  parties^ 
{e.  g  the  defendant  cannot  show  that  it  was  agreed  that  a  blank  indorsement  was  to 
be  without  recourse]. 

Assumpsit  by  the  holder  against  the  indorser  in  blank  of  a  prom- 
issory note.  Plea,  that  in  consideration  of  the  defendant's  agree- 
ment "  to  indorse  said  note  in  blank,  and  to  omit  prefixing  the  words 
'without  recourse'  to  his  said  indorsement,  they,  the  said  plaintiffs, 
by  parol,  then  and  there  promised  and  agreed  that  they  never  would 
have  recourse  to  the  said  defendant  upon  said  note  or  upon  said 
indorsement."  Demurrer  to  the  plea,  and  case  reserved  thereon  for 
the  Supreme  Court. 

[Argument  not  reported.] 

Butler,  C.  J.  We  have  given  this  case  the  consideration  which, 
as  involving  an  important  commercial  question,  it  has  seemed  to  re- 
quire, and  are  of  opinion  that  the  plea  cannot  be  sustained  on  prin- 
ciple or  by  authority. 

First,  it  is  not  sustainable  on  principle. 

The  rule  that  parol  evidence  is  not  admissible  to  contradict  or  vary 
a  written  contract  is  founded  in  the  highest  principles  of  public 
policy,  and  there  is  no  class  of  contracts  to  which  it  should  be  more 
inflexibly  applied  than  to  those  connected  with  bills  of  exchange  and 
promissory  notes.  Nor  is  there  any  one  of  the  varied  and  special 
contracts,  so  connected,  in  respect  to  which  the  application  of  the 
rule  is  more  important  than  the  contract  of  warranty  implied  by  law 
from  the  blank  indorsement  of  a  negotiable  note  by  the  payee  before 
maturity.  It  is  absolutely  essential  to  the  negotiability  of  such  a  note 
that  the  rule  to  which  we  have  alluded  should  be  applied  to  it ;  and  it 
has  always  been  so  applied  when  the  note  has  been  negotiated  to  a 
second  indorsee  and  an  effort  has  been  made  to  prove  some  contempo- 
raneous parol  agreement  in  bar. 

But  it  has  sometimes  been  claimed,  and  is  claimed  in  support  of 
the  plea  in  this  case,  that  notwithstanding  the  rule  is  so  applied  in 
favor  of  a  bona  fide  holder  to  whom  the  note  has  been  negotiated,  yet 
as  between  the  indorser  and  indorsee,  the  original  parties  to  the  con- 
tract of  indorsement,  the  rule  should  not  be  applied.  But  the  answer 
must  be,  that  the  contract  of  indorsement  is  implied  by  law  as  clearly 
and  perfectly  from  the  blank  indorsement  of  a  negotiable  note,  irre- 

1  Of.  White  V.  National  Bank,  ante,  p.  177. 


DALE  V.   GEAK.  185 

spective  of  any  contingency  of  negotiation,  as  if  written  out  in  full 
when  indorsed.    And  jfj^gj^bg^een  the  original  parties,  there  is  any  / 
equity  existing  dehors  theinstrument,  which  should  prevent  the  in-  / 
dorsee  from  enforcing  the  contract,  it  must  be  set  up  as  an  equity  \ 
provable  in  equity,  to  bar  an  apparent  legal  liability;  and  cannot  be 
sho^vTi  because  the  rule  of  evidence  to  which  we  have  alluded  is  not 
aj^plicable.^     The  rule  is  as  applicable  to  such  parties  as  to  others, 
and  the  true  theory  is,  that  the  relation  or  antecedent  agreement  out 
of  which  the  equity  arises  may  be  shown  between  them,  and  proof  of 
it  docs  not  necessarily  contradict  the  contract. 

There  are  four  classes-^ _cases  in  which,  as  exceptional  cases,  and 
as  between  the  original  parties,  indorser  and  indorsee,  any  relation, 
antecedent  agreement,  or  state  of  facts  from  which  a  controlling 
equity  arises,  may  be  pleaded  and  proved  by  parol  in  bar  of  an  action 
on  the  warranty.  Thus,  the  relaiioiLJif  pjindp^l  and.  agent,  may  be 
shown,  for  the  agent  takes  no  title  or  warranty  from  the  indorser, 
but  holds  as  agent.  So.  secoi^dly^it  may  be  shown  that  the  note  was 
indorsed  _  to  tlje  holder  for  some  special  purpose,  and  is  holden  iji 
trust,  as  where  it  is  indorsed  and  delivered  for  collection  merely. 
Lawrence  v.  Stonington  Bank,  6  Conn.  521,  is  an  example  of  this 
class  of  cases  in  our  own  reports.  In  like  manner,  thirdly,  the  rela- 
tion of  principal  and  surety  may  be  sho^iL,  and  that  the  indorsement 
M^as  made  at. the  request  and  for  the  accommodation  of  the  immediate 
indorseej  for  the  equity  of  the  relation  forbids  the  enforcement  of 
the  contract.  Such  was  Case  v.  Spaulding,  24  Conn.  578.  So, 
fourthly,  it  may  be  shown  that  there  was  an  equity  arising  from  an_ 
antecedent  transaction,  including  an  agreement  that  the  note  shoidd 
be  taken  in  sole  reliance  on  the  responsibility  of  the  maker,  and  thiit„ 
it  was  indorsed  Jn  order  to  transfer  the  title  in  pursuance  of  such 
agreernent,  and  that  the  attempt  to  enforce  it  is  a  fraud.  Such  was 
Downer  v.  Cheseborough,  36  Conn.  39.  The  exceptions  illustrate  the 
rule.  But  this  plea  shows  no  agency,  trust,  equitable  relation,  or 
eqiiity^  connected  with  an  antecedent  transaction  constituting  a  con- 
sideration for  the  agreement,  or  which  would  justify  a  court  of  equity 
in  interfering  to  prevent  an  enforcement  of  the  contract  of  warranty 
which  the  law  implies.  It  presents  a  naked  case  of  an  attempt  to 
prove  by  parol  that  a  clear  and  unambiguous  contract  of  warranty  is 
not  such,  and  to  contradict  it  in  terms,  —  to  turn  an  indorsement 
without  restriction,  before  maturity,  into  a  restricted  indorsement. 
Such  a  plea  cannot  be  sustained  without  a  violation  of  essential 
principles. 

Nor  is  the  plea  supported  by  any  well-considered  and  unquestioned 
authority. 

The  defendant  claims,  in  the  first  place,  that  it  is  supported  by  the 

^  That  is,  the  equity  may  be  shown,  not  upon  any  ground  that  the  rule  against 
parol  evidence  is  not  applicable,  but  upon  grounds  of  its  own. 


186  indorsee's  contract. 

decisions  of  this  State,  and  he  relies  on  a  class  of  cases  where  the 
action  was  upon  a  non-negotiable  note,  or  a  negotiable  note  indorsed 
by  one  not  a  party  to  it,  which  by  our  law  stands  on  the  same  ground. 
But  those  decisions  cannot  sustain  him.  That  class  of  blank  indorse- 
ments is  not  controlled  by  commercial  usage,  and  does  not  import  an 
absolute  contract  of  warranty.  The  contract  presumed  by  law  from 
them  is  presumed  prima  facie  only,  and  differs  in  different  States. 
In  this  State  such  indorsements  are  not  only  prima  facie  but  con- 
ditional ;  that  is,  that  the  note  shall  be  collected  of  the  maker  by 
due  diligence.  In  Massachusetts  and  New  York  such  an  indorsement 
is  treated  as  absolute  guaranty,^  or  the  indorser  charged  as  a  joint 
promisor.^  In  all,  the  presumption  is  treated  as  one  of  fact  rather 
than  one  of  law,  and  the  real  contract  made  between  the  parties,  if 
a  special  one,  may  be  written  over  the  signature  of  the  indorser.^  It 
is  otherwise  in  a  note  like  this.  There  are  then  broad  lines  of  dis- 
tinction between  the  two  classes  of  indorsements,  and  the  defendant's 
plea  is  not  supported  by  the  class  of  decisions  referred  to. 

The  defendant  also  relies  on  Case  v.  Spaulding,  24  Conn.  578,  but 
it  does  not  sustain  him.  There  the  defendant  was  not  the  payee,  and 
as  second  indorser  was  not  liable  to  the  payees  of  the  note,  for  they 
as  first  indorsers  were  bound  to  pay  it.  The  defendant  also  indorsed 
at  the  request  of  the  plaintiff  as  surety,  for  his  accommodation,  and 
was  within  one  of  the  classes  of  equitable  exceptions,  where  the  rela- 
tion on  which  the  equity  rests  may  be  shown.  The  dictum  of  Judge 
Ellsworth,  confined  within  the  limits  called  for  by  the  case,  was  un- 
doubtedly true ;  but  the  defendant  does  not  bring  himself  within  the 
exception. 

The  defendant  further  relies  on  Downer  v.  Cheseborough,  36  Conn. 
39,  but  he  is  not  sustained  by  that  case.  It  was  not  put  to  us  as  a 
case  where  the  antecedent  contract  which  created  an  equity  between 
the  parties  could  not  be  shown  under  our  law,  if  the  contract  had 
been  made  here,  in  connection  with  the  agreement  claimed,  to  show 
that  the  plaintiff  was  attempting  to  perpetrate  a  fraud,  but  as  a  case 
where,  by  the  laws  of  New  York,  where  the  contract  was  made,  it 
could  not  be  proved  by  parol.  The  case  turned  solely  on  the  question 
whether  the  law  of  evidence  of  the  forum  or  of  the  lex  loci  contractus 
should  govern.  In  that  aspect  only  we  considered  and  decided  it,  and 
that  question  alone  is  discussed  in  the  opinion.  If  the  questions 
which  are  raised  here  had  been  raised  there,  we  should  have  holden 
without  hesitation,  first,  that  the  indorsement  of  a  negotiable  note 
before  maturity  by  the  payee  creates  an  absolute  warranty  to  the 
immediate  as  well  as  all  subsequent  indorsees  that  the  instrument  and 
the  antecedent  signatures  thereon  are  genuine ;  that  the  indorser  has 

1  As  to  the  rule  in  New  York,  see  ante,  p.  78. 
*  The  rule  in  Massachusetts.  See  ante,  p.  73. 
'  That  is  not  true  in  Massachusetts.    See  Wright  v.  Morse,  9  Gray,  337. 


DALE   V.   GEAR.  187 

title  to  the  instrument,  and  is  competent  to  bind  himself  by  the  in- 
dorsement ;  and  that  the  maker  will  pay  it  on  due  presentment  when 
it  is  due;  but  that,  if  he  does  not,  the  indorscr  will  pay  it  if  due 
notice  is  given  him  of  such  dishonor ;  and,  secondly,  that  no  special 
agreement  —  as  that  the  unrestricted  indorsement  was  intended  or 
agreed  to  be  a  restricted  one  —  can  be  given  by  parol  evidence,  except 
in  the  class  of  cases  adverted  to  where  an  equitable  relation  existed 
between  the  parties  in  respect  to  the  indorsement  when  it  was  made, 
which  rendered  the  enforcement  of  the  contract  inequitable  and 
fraudulent.  Equity  overrides  all  rights,  and  suspends  the  opera- 
tion of  all  legal  rules  between  original  parties  when  necessary  to 
prevent  a  fraudulent  use  of  them;  and  therefore  the  exceptions 
mentioned  have  been  recognized  and  applied  at  law.  Downer  v. 
Cheseborough  was  clearly  within  one  of  the  exceptions,  but  this  case 
is  not. 

The  defendant  under  his  second  point  cites  three  cases  from  Penn- 
sylvania to  show  that  the  contract  set  up  in  the  plea  was  provable 
there  by  parol.  In  examining  those  cases  we  think  the  law  of  Penn- 
sylvania is  otherwise.  The  first  case  cited  is  that  of  Hill  v.  Ely, 
5  Serg.  &  Eawle,  363.  The  marginal  note  sustains  his  claim,  but  the 
case  does  not.  In  that  case  it  appears  that  the  defendant  purchased 
coffee  of  the  plaintiff  upon  an  express  agreement  that  the  plaintiff 
should  receive  in  full  payment  the  notes  of  one  Jabez  Lamb,  without 
the  responsibility  of  the  defendant.  The  notes  were  payable  to  the 
order  of  the  defendant,  and  were  handed  to  the  plaintiff,  pursuant  to 
agreement,  without  indorsement.  The  plaintiff  then  said  to  the 
defendant,  "  Hill,  you  must  indorse  those  notes ; "  to  which  Hill 
replied,  "  That  is  not  our  understanding."  The  plaintiff  rejoined, 
"  They  are  made  payable  to  you ;  how  will  you  convey  them  to  me  ? 
You  must  indorse  them,  in  order  that  I  may  collect  them."  Hill  then 
said,  "  I  indorse  them ;  but  remember,  I  am  not  to  be  held  responsible 
for  their  payment." 

The  case  was  put  to  the  court  by  the  distinguished  counsel  engaged 
solely  on  the  ground  that  the  attempt  of  Hill  [Ely]  to  charge  Ely 
[Hill]  upon  his  indorsement  was  a  fraud,  and  the  court  so  held. 
They  say :  "  The  evidence  offered  went  to  prove  a  direct  fraud  in 
obtaining  the  indorsements  or  their  perversion  to  a  use  never  in- 
tended, —  a  fraudulent  purpose."  The  court  further  say  that  parol 
or  extrinsic  evidence  would  be  received  in  chancery  to  reach  such  a 
fraud,  and  therefore  would  be  received  in  their  courts  at  law;  that 
the  relief  in  equity  would  be  grounded,  not  upon  the  admissibility  of 
parol  evidence  as  between  such  parties  to  contradict  the  writing,  but 
to  show  extrinsic  facts  raising  an  equity  dehors  the  instrument,  to 
prevent  the  fraudulent  purpose.  The  court  also  say  that  the  evidence 
was  admissible  to  show  a  trvst  between  Hill  and  Ely  for  the  purpose 
of  collecting  the  notes  and  applying  the  proceeds  in  payment  for  the 


188  indorsee's  contract. 

coffee.  They  recognize  the  leading  case  of  Hoare  v.  Graham,  3  Camp. 
57,  as  law,  but  distinguish  it  because  in  Hoare  v.  Graham  there  was 
no  allegation  of  fraud.  The  case  is  on  all  fours  with  Downer  v. 
Cheseborough.  In  both  there  was  an  antecedent  contract  which 
raised  an  equity  dehors  the  instrument,  which  made  the  attempt  to 
enforce  the  contract  implied  by  law  from  the  indorsement  a  fraudu- 
lent one  relievable  in  equity.  It  is  implied  in  both  decisions  that  in  a 
case  like  this,  where  no  equity  existed,  such  a  contract  could  not  be 
shown  by  parol. 

Hill  V.  Ely  was  not  overruled  or  shaken  by  the  subsequent  cases 
cited.  Patterson  v.  Todd,  18  Penn.  St.  426,  was  the  case  of  a  nego- 
tiable note,  but  it  was  indorsed  by  the  payee  when  overdue,  and  there 
was  no  subsequent  demand  and  notice.  The  main  question  in  the 
case  was  whether  such  a  demand  should  have  been  made  upon  the 
maker  and  notice  given  to  the  indorser.  It  was  held  that  the  in- 
dorsement was  equivalent  to  drawing  a  new  bill,  and  that  demand 
should  have  been  made  in  a  reasonable  time  and  notice  given  of  the 
dishonor.  The  court  also  held  that  under  the  circumstances  of  that 
case  the  defendant  might  show  by  parol  evidence  that  he  said  he 
would  not  warrant  the  notes.  But  the  court  did  not  question  the 
authority  of  Hill  v.  Ely,  nor  does  it  appear  that  it  has  ever  been 
questioned.  The  remaining  case  cited  from  Pennsylvania  was 
the  case  of  a  non-negotiable  note.  It  has  no  bearing  upon  this 
case. 

The  defendant  under  his  third  point  cites  a  case  from  Massachu- 
setts, and  dicta  from  Judge  Shaw.^  But  the  note  in  that  case  was 
not  negotiable,  and  the  case  and  dicta  are  unimportant.  The  de- 
fendant also  cites  one  English  case  —  that  of  Pike  v.  Street,  Moody 

6  Malkin,  227  —  in  support  of  his  claim.  It  is  suflEicient  to  say  of 
that  case  that  it  is  not  directly  upon  the  point,  is  contrary  to  the 
present  current  of  English  decisions,  and  was  questioned  in  the  re- 
cent case  of  Foster  v.  Jolly,  1  Cromp.  Mees.  &  E.  703, 

These  are  all  the  decisions  cited  by  the  defendant;  and  there  is 
not  one  of  them  directly  in  point  which  can  be  relied  upon  as 
authority.  On  the  other  hand,  the  current  of  decisions  in  England 
is  directly  against  the  admission  of  such  evidence.  Hoare  v.  Graham, 
3  Camp.  57;    Goupy  v.  Hardy,  7  Taunt.  159;    Free  v.  Hawkins, 

8  Taunt.  92.  And  the  adverse  decisions  in  this  country,  whic?i  are 
directly  in  point,  are  quite  numerous.  Bank  of  Albion  v.  Smith,  27 
Barb.  489 ;  Thompson  v.  Ketcham,  8  Johns.  146 ;  Patterson  v.  Hull, 

9  Cowen,  747;    Payne  v.  Ladue,  1  Hill,  116;    Hall  v.  Newcombe, 

7  Hill,  416 ;    Odam  v.  Beard,  1  Blackf.  191 ;    Fuller  v.  McDonald, 

8  Greenl.  213;  Crocker  v.  Gretchel,  23  Me.  392;  Wilson  v.  Black, 
6  Blackf.  509 ;  Barry  v.  Morse,  3  N.  H.  132. 

1  Riley  v.  Gerrish,  9  Cash.  104. 


LITTAUER   V,    GOLDMAN.  1G9 

The  Superior  Court  ^  must  therefore  be  advised  that  the  plea  is 
insufficient. 

Note.  —  Some  of  the  authorities  admit  parol  evidence  to  vary  a  blank  in- 
dorsement, on  the  ground  that,  the  contract  being  implied,  the  parol  evidence 
rule  is  not  violated.  But  does  the  parol  evidence  apply  in  such  a  case  ?  The 
contract  is  one  of  custom,  i.  e.  of  the  law  merchant,  which  has  a  well-defined 
method  by  which  an  indorser  may  exempt  himself  from  liability.  See 
Bigelow,  Bills  and  Notes,  104  and  note  ;  Koss  v.  Espy,  66  Peun.  St.  481. 


LITTAUER   V.    GOLDMAN. 
Court  of  Appeals  of  New  York,  February,  1878.    72  N.  Y.  506. 

One  who  negotiates  a  negotiable  instrument  by  delivery  only,  impliedly  warrants 
to  the  transferee  that  he  has  title,  and  that  the  instrument  is  genuine ;  and,  further,  that 
he  has  no  knowledge  of  any  fact  which  would  impair  its  validity .2 

Action  for  breach  of  warranty  by  a  transferee  against  the  trans- 
feror of  a  negotiable  promissory  note.  The  plaintiff  alleged  that  the 
defendant  sold  to  him  the  note  in  question,  without  indorsing  it,  for 
a  valuable  consideration ;  that  the  note  was  void,  and  that  he  had  not 
been  able  to  collect  it  from  the  maker.  There  was  no  allegation  that 
the  defendant  expressly  warranted  that  the  note  was  valid,  or  that  the 
defendant  knew  that  it  was  void,  when  he  sold  it  to  the  plaintiff. 
Demurrer;  overruled,  and  the  defendant  appealed. 

[Argument  reported.] 

Miller,  J.  The  right  of  the  plaintiff  to  maintain  this  action  rests 
upon  the  ground  that  the  note  in  question  which  was  sold  and  trans- 
ferred by  the  defendant  to  the  plaintiff  was  invalid  and  void,  by 
reason  of  its  original  usurious  consideration.  It  is  alleged  that, 
being  in  violation  of  the  statute  against  usury,  it  was  no  note,  and  by 
implication  of  law  the  defendant  did  warrant  and  undertake  that  the 
same  was  not  usurious  or  illegal,  but  a  valid  and  legal  note.  The 
complaint  does  not  allege  that  the  defendant  had  any  knowledge  of 
the  usury  or  was  a  party  to  the  same,  but  states  that  the  seller  by  the 
act  of  transfer  for  a  valuable  consideration,  impliedly  warranted  that 
the  paper  was  genuine  and  all  that  it  purports  to  be  upon  its  face, 
and  incurred  an  obligation  by  the  sale  to  make  the  paper  good, 
although  he  did  not  indorse  or  guaranty  the  same.  The  question 
whether  an  action  will  lie  for  the  loss  sustained  by  the  plaintiff  by 
reason  of  the  note  being  usurious,  and  the  recovery  of  the  amount 
thereof  thereby  defeated,  has  never  arisen  under  the  precise  circum- 

1  A  slip  for  Court  of  Common  Pleas.  2  n.  I.  L.  §  82. 


190  indoksek's  contract. 

stances  presented  in  this  case,  and  demands  an  examination  of  the 
principle  applicable  to  the  contract  entered  into  upon  the  sale  of 
paper  of  this  description,  and  of  the  authorities  bearing  upon  the 
subject.  The  rule  is  well  settled  that  generally  one  who  transfers 
paper  by  delivery  only,  incurs  none  of  tlie  liabilities  which  attach  to 
an  indorser,  for  the  reason  that  the  irresistible  inference  is,  that  if 
he  transfers  it  and  it  is  received  without  his  indorsement,  such  lia- 
bilities did  not  enter  into  the  bargain  or  the  intention  of  the  parties. 
This  rule,  however,  is  not  without  exception,  and  the  transferor  of 
notes  or  bills  by  delivery  warrants  the_^enuineness^^f  Jhe_sigiiaiiu:es, 
and  that  the  title  is  what  it  purports  toJ)e.  If  the  paper  is  forged 
the  transferor  is  liable  upon  the  original  consideration  which  has 
never  been  extinguished  by  the  sale.  2  Parsons  on  Contracts,  37, 
38.  So,  also,  it  is  laid  do^vn  by  the  same  author  that  the  vendor 
without  indorsement  warrants  that  the  paper  is  of  the  kind  and  de- 
scription that  it  purports  to  be,  and  there  is  an  implied  warranty  that 
the  parties  to  the  paper  are  under  no  incapacity  to  contract,  as  from 
infancy  or  marriage  or  other  disability,  and  the  assignment  of  a  bill 
or  a  note  for  a  valuable  consideration  raises  an  implied  warranty  that 
the  assignor  has  done  nothing,  and  will  do  nothing  to  prevent  the 
assignee  from  collecting  it.  The  reason  given  as  to  forged  paper  is 
that  it  is  nothing,  and  the  one  who  has  transferred  it  has  transferred 
nothing,  and  is  therefore  liable.  2  Parsons  on  Contracts,  39,  40.  The 
question  whether  paper  tainted  with  usury,  which  is  transferred  by 
the  holder  without  knowledge  of  this  defect,  can  be  regarded  as 
within  the  principle  of  the  exceptions  stated,  is  not  free  from  diffi- 
culty, and  at  first  view  there  appears  to  be  some  ground  for  claiming 
that  a  note  made  in  violation  of  a  statute  which  declares  usury  to  be 
a  misdemeanor,  and  that  all  paper  of  this  kind  shall  be  void,  should 
stand  on  the  same  footing  as  forged  or  other  paper,  which  is  excepted 
from  the  general  rule. 

Although  the  reported  cases  do  not  decide  the  exact  point,  an 
examination  of  some  of  the  leading  authorities  tends  to  throw  some 
light  on  the  subject.  In  Marvin,  Prest.  of  the  Delaware  Bank,  v. 
Jarvis,  20  N.  Y.  226,  a  note  was  transferred  to  the  plaintiff  which 
had  been  taken  at  a  usurious  premium  by  the  defendant,  and  the 
avails  received  by  him.  Upon  being  sued  the  defence  of  usury  was 
interposed,  which  was  successful,  and  the  bank  sued  the  defend- 
ant to  recover  the  amount  and  costs  of  prosecuting  the  note.  It  was 
held  that  one  who  transfers  a  chose  in  action  impliedly  warrants 
that  there  is  no  legal  defence  to  its  collection  arising  out  of  his 
own  connection  with  its  origin,  and  that  the  party  accepting  the 
transfer  is  at  liberty  to  act  upon  the  implied  assertion  of  the  validity 
of  the  paper,  and  to  bring  an  action  for  its  collection ;  and  when 
defeated,  to  recover  the  costs  incurred  by  him  from  his  assignor.  The 
opinion  lays  down  the  rule  that  the  authorities  hold  the  doctrine  in 


LITTAUEK  V.   GOLDMAN.  191 

general  terms  that  the  vendee  of  a  cliose  in  action.  In  the  absence  of 
express  stipulations,  impliedly  warrants  its  legal  soundness  and  valid- 
ity, and  that  exceptions  do  not  exist  when  the  invalidity  of  the  debt 
or  security  sold  arises  out  of  the  vendor's  dealing  in  relation  to  it. 
It  is  also  said  that  the  act  of  transferring  the  note  was  the  strongest 
possible  assertion  that  no  legal  defence  existed.  The  defendant  in 
the  case  cited  had  knowledge  of  the  usury,  which  was  not  the  fact 
here,  and  hence  it  differs  from  the  case  at  bar,  and  is  not  decisive  of 
the  question;  but  the  opinion  is  very  strong  in  upholding  the  gen- 
eral doctrine  referred  to  where  there  is  a  radical  defect  in  the  note. 

In  the  cases  of  Whitney  v.  National  Bank  of  Potsdam,  45  N.  Y. 
305,  and  Bell  v.  Dagg,  60  N.  Y.  530,  the  notes  were  forged,  and  the 
implied  warranty  related  to  the  genuineness  of  the  signature,  which, 
as  we  have  seen,  is  expressly  provided  for  in  the  elementary  works. 
In  the  case  of  Gemport  v.  Bartlett,  75  Eng.  C.  L.  E.  849,  an  un- 
stamped bill  of  exchange,  indorsed  in  blank  purporting  to  be  a 
foreign  bill,  was  sold  without  recourse  by  the  holder.  It  was  shown 
to  have  been  drawn  in  the  country  where  the  parties  resided,  and  was 
for  that  reason  unavailable  for  want  of  a  stamp ;  and  it  was  held  that 
the  article  did  not  answer  the  description  of  that  which  was  sold,  viz., 
a  foreign  bill,  and  hence  the  purchaser  could  recover  back  the  price 
from  the  vendor.  This  case  sustains  the  doctrine  that  the  money 
might  be  recovered  as  paid  under  a  mistake  of  fact,  which  seems  to 
have  been  a  mutual  mistake,  and  the  whole  case  appears  to  have  been 
disposed  of  upon  the  ground  that  the  article  did  not  answer  the 
description.  There  is  some  analogy  between  the  case  last  cited  and 
the  one  at  bar,  for  here  the  note  on  its  face  purported  to  be  valid,  and 
was  only  shown  not  to  be  by  proof  of  extrinsic  facts,  which  affected  the 
original  consideration.  The  difference,  however,  is  that  in  the  case 
last  cited  the  purchaser  contracted  for  a  foreign  bill  which  required 
no  stamp,  and  did  not  receive  what  he  was  entitled  to,  while  here 
there  was  a  secret  defect  unknown  to  both  parties,  and  not  provided 
for ;  and  as  was  said  by  the  Lord  Chief  Justice  in  Gemport  v.  Bart- 
lett :  "  If  it  really  had  been  a  foreign  bill,  any  secret  defect  would 
have  been  at  the  risk  of  the  purchaser."  From  the  authorities  to 
which  we  have  adverted,  it  appears  that  in  every  case  where  usury 
was  involved  there  was  knowledge  of  its  existence  on  the  part  of  the 
person  who  held  and  transferred  the  note.  It  is  true  that  in  Dela- 
ware Bank  v.  Jarvis,  supra,  it  is  remarked  bv  the  judge  that  he  does 
not  consider  it  a  material  circumstance  that  the  defendant  had  knowl- 
edge that  the  note  had  not  been  negotiated  prior  to  the  time  when  it 
was  received,  and,  as  we  have  seen,  lavs  down  the  broad  rule  that,  in 
any  case  where  there  is  not  an  express  asreement,  the  vendor  of  a 
cliose  in  action  warrants  not  only  the  title,  but  the  soundness  and 
validity  of  the  note.    The  opinion  of  the  learned  judge  is  entitled  to 


192  indorsee's  contract. 

great  respect;  but,  as  the  facts  show  it  was  not  necessary  to  go  to 
this  extent  to  sustain  the  decision  made,  it  is  not  entirely  controlling. 

It  is  of  grave  importance  whether  a  scienter  is  material  for  the 
purpose  of  upholding  an  implied  warranty  in  a  case  of  this  kind.  In 
Hoe  V.  Sanborn,  21  N.  Y.  552,  Selden,  J.,  lays  down  the  rule,  "  that 
whenever  an  article  sold  has  some  latent  defect,  which  is  known  to 
the  seller,  and  not  to  the  purchaser,  the  former  is  liable  for  this 
defect  if  he  fails  to  discover  his  knowledge  on  the  subject  at  the  time 
of  the  sale."  He  proceeds  to  state  that  where  knowledge  is  proved  by 
direct  evidence,  the  responsibility  rests  upon  the  ground  of  fraud; 
but  where  the  probability  of  knowledge  is  so  strong  that  courts  will 
presume  its  existence  without  proof,  the  vendor  is  held  responsible 
upon  an  implied  warranty ;  and  the  difference  between  the  two  cases 
is,  that  in  the  one  the  scienter  is  actually  proved;  in  the  other  it  is 
presumed.  A  scienter  is,  therefore,  essential  to  establish  an  implied 
warranty ;  and,  as  we  have  seen,  the  cases  to  which  we  have  referred 
all  show  knowledge  on  the  part  of  the  vendor.  The  cases  which 
are  cited  to  sustain  the  doctrine  that  the  scienter  is  immaterial 
where  there  is  a  warranty  either  express  or  implied  do  not  go  to  that 
extent.  .  .  . 

It  is  true  that  some  of  the  cases  to  which  we  have  referred,  hold  that 
express  representations  are  not  necessary  to  establish  a  case  and  fix 
a  liability,  but  in  all  of  those  where  the  notes  were  affected  by  usury 
the  evidence  showed  that  such  fact  was  known  to  the  defendant.  The 
case  of  a  forged  instrument,  as  we  have  seen,  rests  upon  a  different 
principle,  viz.,  that  the  note  is  no  note,  and  hence  none  of  the  cases 
cited  aid  the  plaintiff.  The  doctrine  that  an  action  can  be  main- 
tained to  recover  back  the  purchase-price  paid  under  a  contract  of 
sale  of  personal  property,  without  proof  of  warranty  or  fraud,  where, 
upon  delivery  of  the  property,  it  proves  utterly  valueless,  and  where 
an  offer  to  return  has  been  made  and  refused,  which  is  held  in  Stone 
V.  Frost,  61  N.  Y.  614,  is  scarcely  applicable  to  negotiable  paper, 
which  must  be  governed  by  entirely  a  different  rule.  In  the  latter 
ease,  where  the  transfer  is  made  without  indorsement,  it  is  not  un- 
reasonable to  suppose  that  certain  liabilities  did  not  enter  into  the 
consideration  of  the  transfer,  and  had  it  been  so  intended  some  agree- 
ment would  have  been  made  in  regard  to  the  same.  .  .  . 

The  examination  we  have  made  of  the  question  shows  that  the  law 
in  regard  to  the  transfer  of  negotiable  bills  of  exchange  and  promis- 
sory notes,  as  laid  down  for  a  century  or  more,  only  excepts  two 
cases  as  coming  within  the  doctrine  of  an  implied  warranty,  viz.,  a 
warranty  of  title,  and  that  the  instrument  is  genuine  and  not  forged.^ 
There  is  no  precedent  and  not  a  single  reported  case  in  the  books  in 
favor  of  the  doctrine  that  where  a  promissory  note  is  infected  with 
usury,  and  that  fact  is  unknown  to  the  party  who  transferred  it,  there 
1  Cf .  N.  I.  L.  §  82,  3,  "  That  all  prior  parties  had  capacity  to  contract." 


LITTAUER   V.    GOLDMAN.  193 

is  an  implied  warranty  of  the  validity  of  the  note.  To  uphold  such 
a  doctrine  would  be  an  innovation  upon  a  settled  principle  of  law, 
and  the  establishing  of  a  new  and  different  rule  from  that  which  has 
governed  the  sale  and  transfer  of  this  species  of  property  for  a  long 
period  of  time.  It  is  at  least  exceedingly  doubtful  whether  it  would 
be  expedient  to  inaugurate  a  new  and  questionable  rule  of  conduct 
for  the  government  of  transactions  of  this  description,  even  if  the  law 
permitted  it  to  be  done.  The  hardship  which  may  fall  upon  the 
plaintiff  by  the  purchase  of  the  paper  in  question  may  operate  quite 
as  harshly  on  the  defendant,  as  the  assumption  is  that  he  had  no 
knowledge  of  the  inherent  vice  which  affected  the  note.  It  is  difficult 
to  apply  the  rules  of  law  in  all  cases  with  exact  justice.  In  fact,  if 
the  rule  be  as  the  authorities  hold,  and  as  should  be  if  it  is  not  well 
understood,  that  the  purchaser  of  paper  of  this  description  takes  it  at 
his  own  hazard  and  risk  without  any  warranty,  unless  he  chooses  to 
require  such  an  indemnity,  and  makes  it  a  part  of  the  contract,  no 
serious  inconvenience  or  injury  can  follow.  The  doctrine  of  caveat 
emptor  applies,  and  the  fault  is  with  the  person  who  fails  to  exact  a 
warranty,  if  it  turns  out  that  he  has  been  mistaken  or  has  unfortu- 
nately made  an  unprofitable  or  a  bad  bargain.  Neither  party  has  any 
just  ground  of  complaint  in  such  a  case. 

The  result  is  that  the  judgment  was  wrong  and  must  be  reversed, 
with  leave  to  the  plaintiff  to  amend  his  complaint  upon  the  usual 
terms  in  such  cases. 

All  concur  except  Earl,  J.,  dissenting. 

Judgment  accordingly. 

Note.  —  The  decision  in  this  case  has  been  sharply  criticised.  In  Meyer 
».  Richards,  163  U.  S.  385,  Mr.  Justice  White,  in  an  elaborate  opinion,  re- 
viewing the  cases,  said:  "  Tliere  is  an  exceptional  case  (Littauer  v.  Goldman, 
72  N.  Y.  506),  which  holds  that  the  common-law  obligation,  as  to  the  implied 
warranty  of  the  identity  of  the  thing  sold,  in  the  case  of  commercial  paper 
extends  only  to  the  genuineness  of  the  instrument.  The  case  was  one  involv- 
ing the  nullity  of  a  usurious  note,  and,  if  correctly  decided,  would  be  authority 
for  the  proposition  that  there  was  a  peculiar  species  of  warranty  in  the  sale  of 
commercial  paper,  differing  from  all  others;  in  other  words,  that  there  was  a 
law  merchant  of  warranty  where  there  was  no  commercial  contract.  The 
opinion  in  this  case  illustrates  the  same  contradictory  position  presented  here 
by  the  argument  for  the  defendant  in  error,  to  which  we  have  just  called  atr- 
tention,  that  is,  that  it  admits  the  common-law  rule,  and  then  denies  its 
essential  result  by  eliminating  conditions  of  non-existence  which  are  necessa- 
rily embraced  by  it.  .  .  .  Either  the  principle  of  warranty  of  identity  must  be 
accepted  or  rejected;  it  cannot  be  accepted  and  its  legitimate  and  inevitable 
results  denied.  The  rule  there  announced  was  in  conflict  with  previous  de- 
cisions in  New  York,  and  the  decision  is  strongly  criticised  by  the  Court  of 
Errors  and  Appeals  of  New  Jersey  in  Wood  v.  Sheldon,  42  N.  J.  L.  421,  425." 

When  the  defect  goes  to  the  title  of  the  transferor  or  to  the  genuineness  or 
existence  of  the  thing  sold,  the  common-law  rule  of  implied  warranty  is  applied. 
In  Hannum  v.  Richardson,  48  Vt.  508,  the  plaintiff  brought  an  action  of 

13 


194  indorsee's  contract. 

assu77ip!iit  for  breach  of  warranty.  The  facts  were  that  the  defendant  had 
indorsed,  without  recourse  to  the  plaintiff,  a  note  which  had  been  given  for 
intoxicatinjT  liquor,  and  which  was  void  by  statute.  In  affirming  a  judgment 
for  the  plaintiff,  the  court  said,  per  Pierpont,  C.  J.  :  "  By  indorsing  the 
note  'without  recourse,' the  defendant  refused  to  assume  the  responsibility 
and  liability  which  the  law  attaches  to  an  unqualified  indorsement,  so  that  in 
respect  to  such  liability  it  may  perhaps  be  regarded  as  standing  without  in- 
dorsement. If  it  be  so  regarded,  then  in  what  position  do  these  parties  stand 
in  respect  to  the  transaction  ?  The  principle  is  well  settled,  that  where  per- 
sonal property  of  any  kind  is  sold,  there  is  on  the  part  of  the  seller  an  implied 
warranty  that  he  has  title  to  the  property,  and  that  it  is  what  it  purports  to 
be,  and  is  tliat  for  which  it  was  sold,  as  understood  by  the  parties  at  the  time; 
and  in  such  case  knowledge  on  the  part  of  the  seller  is  not  necessary  to  his 
liability.  The  implied  warranty  is,  in  this  respect,  like  an  express  warranty, 
the  scienter  need  not  be  alleged  or  proved.  ...  In  this  case  the  note  in  ques- 
tion was  given  for  intoxicating  liquors  sold  in  this  State  in  violation  of  law, 
and  therefore  was  void  at  its  inception ;  ^  in  short,  it  was  not  a  note,  it  was  not 
what  it  purported  to  be,  or  what  it  was  sold  or  purchased  for.  ...  In  this 
view  of  the  case  we  think  the  defendant  is  liable  upon  a  warranty  that  the 
thing  sold  was  a  valid  note  of  hand." 

But  it  seems  that  there  is  a  peculiar  warranty  in  the  sale  of  a  commercial 
instrument,  to  wit,  that  the  vendor  has  no  knowledge  of  any  facts  which 
would  render  the  instrument  valueless  ;  e.  g.  that  the  makers  of  a  promissory 
note  were  insolvent  at  the  time  of  the  sale.  Hecht  v.  Batcheller,  147  Mass. 
335 ;  Brown  v.  Montgomery,  20  N.  Y.  287  ;  N.  I.  L.  §  82,  4. 

The  Statute  is  not  clear  upon  the  question  whether  knowledge  must  be 
proved  in  such  a  case  as  Littauer  v.  Goldman,  supra.  Section  82,  subdiv.  1, 
provides  that  the  transferor  by  delivery  or  by  qualified  indorsement  warrants 
that  the  instrument  is  "  what  it  purports  to  be;  "  while  subdiv.  4  says  that 
he  warrants  "that  he  has  no  knowledge  of  any  fact  which  would  impair  the 
validity  of  the  instrument  or  render  it  valueless."  The  difficulty  arises  from 
the  different  construction  put  by  the  courts  upon  secret  defects  rendering  an 
instrument  void.  In  Littauer  v.  Goldman,  the  court  held  that  the  note  was 
what  was  purported  to  be  sold,  but  that  a  "secret  defect "  rendered  it  invalid 
and  void;  while  in  Meyer  v.  Richards,  supra,  in  which  case  bonds,  rendered 
void  by  the  constitution  of  the  State,  were  sold,  the  court  held  that  the  thing 
transferred  was  not  the  thing  which  was  bargained  for;  and  this  construction 
was  put  upon  Littauer  v.  Goldman  by  the  court.  See  also  Hannum  v. 
Richardson,  supra,  in  which  it  was  held  that  the  note  was  not  what  it  pur- 
ported to  be,  though  the  defect  was  a  "secret"  one. 

"  The  error  in  the  theory  adopted  by  the  Court  of  Appeals  of  New  York, 
we  think,  is  this :  It  likens  the  unknown  illegality  of  the  paper  sold,  to  a 
latent  defect  in  an  article  sold  to  which  the  doctrine  of  caveat  emptor  applies. 
The  analogy  does  not  hold.  Unknown  insolvency  of  a  party  to  the  instru- 
ment is  the  correlative  to  the  defect  in  an  article  sold  —  a  latent  vice  affecting 
its  quality  and  value.  But  when  the  iastruraent  is  null  and  void  —  in  fact, 
no  instrument  at  all  in  legal  existence  —  it  does  not  respond  to  the  description 
which  its  face  imports.  It  is  the  mere  semblance  of  a  bill  or  note,  not  one  in 
truth  —  and  no  one  can  acquire  any  legal  title  to  it.  We  speak,  of  course, 
of  those  instruments  which  are  void  by  statute  in  all  hands  whatever.  .  .  . 
Eoi'ged  paper  is  void ;  and  any  paper  so  denounced  as  void  by  statute  is 

1  Statutes  in  many  States  save  the  rights  of  bona  fide  purchasers. 


THE  STATE  BANK  V.   FEAKING.  195 

equally  so."  Daniel  on  Negotiable  Instruments,  15th  ed.,  pp.  714,  715.  It  has 
been  declared  that  §  82,  subdiv.  4,  codifies  the  rule  in  Littauer  v.  Goldman. 
Prof.  James  Barr  Ames,  in  Vol.  14,  Harv.  Law  Review,  241,  252 ;  but  qucere, 
whether  this  is  necessarily  so.  It  seems  that  whether  it  is  or  not  will  depend 
upon  the  construction  which  the  court  puts  upon  the  fact  which  renders  the 
instrument  invalid ;  if  that  of  Meyers  v.  Richards,  supra,  then  the  case  will 
fall  within  subdiv.  1 ;  if  that  of  Littauer  v.  Goldman,  then  the  case  will  come 
within  subdiv.  4.  That  is  to  say,  the  court  will  have  to  determine  what  con- 
stitutes a  secret  defect,  within  the  meaning  of  this  rule  of  warranty. 

In  theory,  it  seems  that  if  the  instrument  never  had  any  existence  as  a  leeal 
obligation,  no  knowledge  on  the  part  of  the  transferor  need  be  proved  to  make 
a  case  of  liability  ;  if,  however,  the  instrument  existed,  according  to  its  pur- 
port, but  there  was  some  fact,  such  as  a  failure  of  consideration,  payment,  or 
other  equity,  which  was  available  against  the  transferee,  for  example,  where 
the  transfer  took  place  after  maturity,  then,  to  recover,  the  plaintiff  must  prove 
that  the  defendant  had  knowledge  of  the  fact,  and  the  case  falls  within 
subdiv.  4. 

There  is  a  second  peculiarity  in  regard  to  warranty,  touching  the  law  of 
bills  and  notes,  in  that,  by  the  Statute,  the  warranty  of  indorsement  runs  to 
remote  bona  fide  holders,  making  it,  so  far,  negotiable.     N.  I.  L.  §§  82,  83. 


f 


THE    STATE   BANK   v.    FEARIXa. 
Supreme  Court  of  Massachusetts,  March,  1835.     16  Pick.  533. 


An  indorser  without  qualification  admits,  as  an  incident  of  his  indorsement,  that 
the  signatures  of  prior  parties  are  genuine.^ 

Assumpsit  on  a  promissory  note  for  the  sum  of  $2000,  dated  April 
15,  1833,  payable  to  the  order  of  Thomas  Jackson,  junior,  in  six 
months,  made  by  Charles  Brown,  and  indorsed  with  the  names  of  the 
payee  and  of  the  defendant. 

By  an  agreed  statement  of  facts,  it  appeared  that  the  signatures  of 
Brown  and  the  defendant  were  genuine,  but  that  the  defendant  could 
prove,  if  such  evidence  was  admissible,  that  the  indorsement  of  the 
name  of  the  payee  was  a  forgery;  that  the  note  was  presented  by 
Brown  to  the  plaintiffs  for  discount,  in  the  usual  course  of  business, 
and  discounted  by  them  for  him ;  that,  at  the  time  of  such  discount, 
the  plaintiffs  and  the  defendant  were  ignorant  of  the  forgery;  and 
that  due  notice  of  the  non-payment  of  the  note  was  given  to  Brown, 
Jackson,  and  the  defendant. 

If  upon  this  statement  of  facts  the  court  should  be  of  opinion  that 
the  plaintiffs  were  entitled  to  judgment,  the  defendant  was  to  be 
defaulted :  otherwise,  the  plaintiffs  were  to  be  nonsuited. 

[Argument  not  reported,] 

1  C£.  N.  I.  L.  §  79. 


196  indorsee's  contract. 

Shaw,  C.  J.  The  peculiar  features  of  this  action  are,  that  the 
plaintiffs  claim  of  the  second  indorser,  from  whom  they  immediately 
took  the  note.  The  question  is,  whether  the  forgery  of  the  indorse- 
ment of  the  name  of  a  prior  party  is  a  good  defence  to  the  note ;  and 
the  court  are  of  opinion  that  it  is  not. 

In  general  it  is  not  necessary  for  the  holder  to  prove  the  signature 
of  any  party  prior  to  the  party  whom  he  sues.  The  reason  seems  to 
be  obvious,  that  the  party  defendant,  by  his  indorsement,  has  ad- 
mitted the  ability  and  the  signature  of  all  prior  parties.  Bayley  on 
Bills,  313;  Critchlow  v.  Parry,  2  Camp.  182.  The  effect  of  the 
engagement  of  the  indorser  is,  that  if  the  prior  parties  do  not  pay  the 
note  according  to  its  tenor  upon  due  presentment,  upon  notice  to  him 
he  will.  It  is  therefore  a  rule  upon  this  subject,  that  a  plaintiff  is 
under  no  obligation  to  prove  the  signature  of  those  prior  to  the  party 
intended  to  be  charged.  It  is  very  different  where  he  claims  against 
the  acceptor  of  a  bill  or  maker  of  a  note.  They  respectively  promise 
to  pay  to  the  payee  or  his  order,  and  until  he  has  made  such  order  by 
his  indorsement  the  plaintiff  can  establish  no  title,  and,  to  prove  such 
order,  he  must  prove  the  genuineness  of  his  signature.  Smith  v. 
Chester,  1  T,  R.  654;  Lambert  v.  Pack,  1  Salk.  127.  So  an  acceptor 
is  bound,  though  the  bill  be  forged.    Jengs  v.  Fawler,  2  Strange,  946. 

The  circumstance  that  this  bill  was  offered  for  discount  by  Brown 
makes  no  difference ;  the  plaintiffs  had  a  right  to  look  to  their  imme- 
diate indorser,  and  if  satisfied  to  take  the  note  on  his  credit,  he  is 
liable  to  them ;  and  it  was  for  him  to  see  that  he  has  a  good  remedy 
over  against  those  who  purport  to  be  prior  parties. 

Defendant  defaulted. 


ERWIN"   V.    DOWN'S. 

Court  of  Appeals  of  New  York,  June,  1857.     15  N.  Y.  575. 

And  that  prior  parties  had  capacity  to  contract.  The  tendency  of  the  late  American 
anthorities  has  been  to  speak  of  this  as  a  contract  or  warranty.^ 

Action  upon  two  accommodation  promissory  notes  jointly  made 
by  the  same  persons,  each  note  payable  to  the  defendant,  and  indorsed 
by  him.  The  plaintiff  took  them  for  value  before  maturity.  Defence, 
that  the  makers  were  married  women  when  they  signed  the  notes, 
and  incompetent  to  contract,  and  that  the  plaintiff  knew  the  fact 
when  he  took  the  notes.  There  had  been  due  demand  and  notice  of 
dishonor.  Judgment  for  the  plaintiff  on  report  of  referee;  the 
defendant  appealed. 

[Argument  not  reported.] 

1  See  Bigelow,  Bills  and  Notes,  pp.  98,  99  and  note.  It  shonld  be  observed  that 
the  action  in  these  cases  is  apon  the  instrument,  on  the  indorser's  conditional  promise 
to  pay. 


WABREN-SCHARF  ASPHALT  CO.  V.  COMMERCIAL  NATIONAL  BANK.      197 

Shankland,  J.  The  note  was  void,  as  against  the  makers,  because 
they  were  married  women,  and  incapable  of  contracting  obligations 
in  that  form.^  But  when  the  defendant  indorsed  the  note,  he  im- 
pliedly contracted  that  the  makers  were  competent  to  contract,  and 
had  legally  contracted,  the  obligation  of  joint  makers  of  the  note. 
He  also  assumed  the  legal  obligation,  in  most  respects,  of  the  drawers 
of  a  bill.  The  fact,  known  to  the  plaintiff  at  the  time  he  took  the 
note,  that  the  makers  were  married  women,  did  not  deprive  him  of 
the  character  of  a  hona  fide  purchaser;  nor  does  the  payee's  knowl- 
edge that  the  drawee  is  a  married  woman  discharge  the  drawer  in  case 
of  non-payment  of  the  bill  by  the  drawee;  nor  is  the  indorser  dis- 
charged, though  the  name  of  the  maker  is  forged.  1  Comst.  113. 
The  fact  is  not  found  that  the  plaintiff  was  aware  the  note  was  accom- 
modation paper.  The  plaintiff  was  a  hona  fide  purchaser  within  the 
law  merchant.  Neither  the  complaint  nor  the  finding  of  the  referee 
tells  us  who  transferred  the  notes  to  the  plaintiff.  The  legal  pre- 
sumption is,  that  he  received  them  from  some  legal  holder  in  due 
course  of  business. 

Judgment  affirmed. 


WAREEN-SCHARF  ASPHALT  PAVING  COMPANY  v. 
COMMERCIAL    NATIONAL   BANK. 

Circuit  Court  of  Appeals  of  the  United  States,  October,  1899.     97  Fed.  R.  181. 

And  it  has  been  held  that  an  indorser  without  qaalification  incurs  a  distinct  liabil- 
ity in  implied  warranty,  apart  from  his  conditional  engagement  to  pay  the  instrument ; 
for  example,  if  prior  signatures  are  forged.^ 

Action  on  an  implied  warranty,  by  the  indorsee  against  the  in- 
dorser of  a  cheque. 

The  Warren-Scharf  Company,  having  places  of  business  in  New 
York  and  Detroit,  was  a  depositor  in  the  Commercial  National  Bank 
of  Detroit,  and  was  accustomed  to  make  deposits  and  draw  cheques 
through  one  England,  its  attorney  and  cashier, 

A  certificate  of  England's  authority  had  been  sent  by  the  company 
to  the  bank,  which  certificate  was  as  follows: 

"Office  of  Warren-Scharf  Asphalt  Paving  Company, 

81  Fulton  Street. 

New  York,  July  8,  1897.    No.  243. 

To  the  Commercial  National  Bank  of  the  City  of  Detroit,  State 
of  Michigan:   This  certifies  that  C.  R.  England  is  officially  author- 

1  See  Rev.  Laws  of  Mass.  ch.  15.3,  §  2,  to  the  effect  that  a  married  woman  may 
contract  as  if  sole,  except  that  she  may  not  contract  with  her  husband. 
*  This  apparently  is  the  rule  of  the  Statute.     See  N.  I.  L.  §  83,  1  and  2. 


198  indorsee's  contkact. 

ized  to  indorse  and  sign  cheques  and  deposit  moneys  and  make  drafts 
on  this  company  in  the  name  and  for  the  use  of  this  company,  in  and 
through  the  Commercial  National  Bank  of  the  City  of  Detroit,  State 
of  Michigan,  until  this  power  of  attorney  shall  have  been  officially 
cancelled,  but  not  longer  than  during  the  year  1897.  .  .  .  The  said 
bank  account  to  be  kept  in  the  name  of  this  company,  and  all  cheques 
drawn  against  or  indorsed  for  deposit  to  said  account  by  the  said 
C.  R.  England  to  be  in  the  name  of  this  company." 

This  certificate  was  signed  by  the  company  by  its  treasurer  and 
president. 

Cheques  drawn  by  the  company  on  its  New  York  bank,  payable  to 
its  own  order,  had,  on  several  occasions,  been  indorsed  by  England  as 
attorney  and  cashier  for  the  company,  and  had  been  deposited  in  the 
Commercial  Bank,  and  the  bank  had  always  credited  the  company 
with  the  amount  of  such  cheques,  and  had  allowed  the  company  to 
draw  against  the  balance  so  created. 

On  August  7,  1897,  the  following  cheque  was  presented  to  the  bank 
for  deposit  by  England,  and  the  amount  placed  to  the  credit  of  the 
bank: 

"  No.  H  2,  985.  New  York,  Aug.  5,  1897. 

Warren-Schaef  Asphalt  Paving  Company. 

Pay  to  the  order  of  Warren- Scharf  Asphalt  Paving  Company  ten 
thousand  &  r%%  dollars  ($10,000.00). 

Jas.  D.  Law^eence,  Attorney  and  Cashier. 
To  th6  National  City  Bank,  New  York." 

Indorsement : 
V,  "  Pay  to  order  of  Commercial  National  Bank,  Detroit,  Michigan. 
Warren-Scharf  Asphalt  Paving  Company, 

By  C.  E.  England,  Atty.  &  Cashier.'' 

On  the  same  day,  the  bank  paid  to  England  $10,000,  on  a  cheque 
of  the  company,  drawn  payable  to  the  order  of  cash,  and  duly  signed 
by  England  in  the  usual  manner.  Apart  from  the  cheque  of  August 
5,  supra,  there  were  not  sufficient  funds  on  deposit  to  pay  this  cheque. 

The  signature  of  Jas.  D.  Lawrence,  on  the  cheque  of  August  5, 
had  been  forged  by  England,  who  had  disappeared  with  the  money 
drawn  by  him  on  August  7.  This  action  is  to  recover  back  the  $10,000 
paid  to  England.  The  judge  in  the  lower  court  instructed  the  jury  to 
find  a  verdict  for  the  plaintiff,  and  the  defendant  brought  this  writ 
of  error. 

[Argument  not  reported.] 


WAEREN-SCHARF  ASPHALT  CO.  V.  COMMERCIAL  NATIONAL  BANK.      199 

LuRTON,  Circuit  Judge.  .  .  . 

The  authority  expressly  conferred  upon  England  included  the 
power  to  "  indorse  and  sign  cheques."  The  evidence  shows  that 
remittances  were  several  times  made  to  him  from  the  New  York 
office  of  the  company  by  cheques  payable  to  its  own  order.  To  utilize 
them,  an  indorsement  was  essential.  An  indorsement  of  a  cheque 
purporting  to  be  payable  to  the  order  of  the  paving  company,  for  the 
purpose  of  either  collection  or  deposit,  implied  a  contract  that  the 
instrument  itself  and  all  antecedent  indorsements  were  genuine. 
Story,  Prom.  Notes,  §§  135-380,  387;  4  Am.  &  Eng.  Encyc.  Law 
(2d  ed.),  447;  Harris  v.  Bradley,  7  Yerg.  310;  Turnbull  v.  Bowyer, 
40  N".  Y.  456^60 ;  Onondaga  County  Sav.  Bank  v.  U.  S.,  26  U.  S. 
App.  377,  12  C.  C.  A.  407,  and  64  Fed.  703.  In  the  absence  of  cir- 
cumstances amounting  to  notice  that  the  signature  of  the  paving 
company  was  a  forgery,  the  defendant  in  error  had  a  right  to  rely 
upon  the  indorsement  made  by  England  as  a  representation  and 
guaranty  by  the  payee  that  the  cheque  itself,  as  well  as  the  signa- 
ture of  the  drawer,  was  genuine.  Although  the  defendant  in  error 
was  bound  at  its  peril  to  know  the  signature  of  a  cheque  drawn  by 
England  under  the  power  of  attorney  to  him,  yet  it  was  not  the  payee 
of  this  forged  cheque ;  and  it  was  not  bound  to  know  the  New  York 
signature  of  the  paving  company,  or  the  genuineness  of  the  filling 
up  of  a  cheque  purporting  to  have  been  drawn  at  the  principal  office 
of  the  corporation  upon  its  New  York  bank  of  deposit.  Unless, 
therefore,  it  acted  in  bad  faith,  or  the  forgery  was  so  obvious  that 
it  should  have  been  detected  by  bare  inspection,  it  was  not  negligent 
in  accepting  the  cheque  as  a  cash  deposit  in  reliance  upon  the  repre- 
sentation of  the  known  local  agent  of  the  apparent  drawer,  and  upon 
the  contract  implied  from  the  indorsement  placed  thereon  by  Eng- 
land under  his  known  authority.  National  Bank  of  Commerce  v. 
National  Mechanics'  Banking  Ass'n,  55  N.  Y.  211-215. 

Neither  in  the  form  or  signature  of  the  cheque,  nor  in  any  circum- 
stance occurring  when  the  cheque  was  indorsed  and  deposited,  do  we 
find  any  fact  which  would  justify  a  jury  in  holding  the  defendant  in 
error  guilty  of  any  negligence  in  taking  this  forged  cheque  and 
crediting  it  as  a  cash  deposit.  The  instrument  turned  out  to  have 
been  unauthorized  by  the  apparent  drawer,  and  the  signature  a  for- 
gery. If  the  drawer  and  payee  were  not  legally  identical  with  the 
indorsee,  the  fact  that  the  instrument  was  not  genuine,  and  the 
drawer's  signature  a  forgery,  would  operate  to  fix  the  liability  of 
the  indorser  as  absolute,  without  either  demand  or  notice.  In  such 
a  case  the  indorsee  would  become  entitled  to  recover  the  amount  of 
the  cheque  from  the  indorser  upon  the  implied  warranty  that  the 
instrument  and  the  antecedent  signatures  were  genuine.  Liability 
would  be  fixed  before  and  without  any  presentation  of  such  a  forged 
cheque.    Turnbull  v.  Bowyer,  40  N.  Y.  456-460.    The  fact  that  the 


200  indorsee's  contract. 

drawer,  payee,  and  indorser  were  legally  the  same  person  does  not 
change  the  principle.  The  indorsement  of  this  cheque  by  the  paving 
company,  or  by  one  authorized  to  indorse  in  its  name,  was  equally 
effective  as  a  warranty  of  the  genuineness  of  both  the  instrument 
itself  and  all  antecedent  signatures.  The  liability  of  the  paving  com- 
pany growing  out  of  its  relation  to  the  instrument  as  an  indorser 
was,  by  reason  of  the  fact  that  the  instrument  was  a  forgery,  not  the 
usual  contingent  liability  of  an  indorser,  but  one  of  fixed  responsi- 
bility as  a  warrantor  of  the  genuineness  of  the  paper  indorsed. 

But  it  is  said  that  the  authority  to  England  did  not  authorize  him 
to  overcheque,  and  that,  until  the  cheque  deposited  had  been  actually 
collected,  there  was  no  authority  to  pay  the  $10,000  cheque  presented 
on  the  same  day.  The  forged  cheque  was  the  apparent  cheque  of 
a  responsible  customer  upon  another  bank.  According  to  the  well- 
recognized  course  of  banking  business,  this  cheque  was  accepted  as 
a  cash  deposit.  Morse,  Banks,  §§  569,  570.  The  receiving  teller 
testifies  that  in  the  acceptance  of  this  cheque,  and  crediting  it  at 
once  to  the  account  of  the  paving  company,  there  was  nothing  out  of 
the  ordinary  course  of  banking  business.  This  evidence  is  not  con- 
tradicted or  questioned.  The  bank  was  under  no  obligation  to  credit 
a  cheque  thus  deposited  as  cash,  but  it  was  clearly  guilty  of  no 
negligent  or  unusual  conduct  in  doing  so.  When  received  and 
credited  as  cash,  the  account  was  subject  to  cheque,  and  the  bank 
had  no  right  to  refuse  to  pay  cheques  against  the  account  thus 
swollen.  Armstrong  v.  Bank,  i33  U.  S.  483-466,  10  Sup.  Ct.  450. 
The  cheque  subsequently  paid  was  in  no  true  sense  an  overdraft, 
and  the  bank  became  the  bona  fide  holder  of  the  forged  cheque 
for  value  so  soon  as  cheques  were  drawn  and  paid  by  reason  of  the 
credit  thus  obtained. 

It  is  urged  that  the  cheque  drawn  by  and  paid  to  England  on 
August  7  was  not  a  cheque  drawn  in  the  name  of  the  paving 
company.  The  authority  of  England  was  to  "  indorse  and  sign 
cheques ; "  "  all  cheques  drawn  against  or  indorsed  for  deposit  to 
said  account  by  the  said  England  to  be  in  the  name  of  this  company." 
It  is  said  that  the  $10,000  cheque  paid  to  England  was  signed  only 
in  the  name  of  "  C.  E.  England,  Atty.  &  Cashier."  This  is  a  misread- 
ing of  the  instrument.  The  name  of  the  "  Warren-Scharf  Asphalt 
Paving  Company "  appears  on  the  face  of  the  cheque  above  the 
signature  of  England.  It  is  true  that  the  name  of  the  company 
appears  above  the  words  "  Pay  to  the  order  of  cash."  This  cheque 
was  in  the  form  of  all  previous  cheques  drawn  against  this  account. 
The  name  of  the  paving  company  is  engraved  or  printed  on  the 
cheque,  and  was  taken  from  the  cheque  book  furnished  England 
by  the  company.  It  is  likewise  the  form  in  which  the  company's 
name  was  signed  upon  cheques  drawn  at  its  principal  office  against 
its  New  York  account.     The  objection  is  not  well  taken. 


TOWNSEND   V.   BUSH.  201 

There  was  no  error  in  instructing  the  jury  to  find  for  the  de- 
fendant in  error,  as  there  was  no  such  conflict  of  evidence  as  would 
properly  make  an  issue  for  the  jury.  The  judgment  is  accordingly 
affirmed. 

Note.  —  Cf.  Blethen  in  Lovering,  66  Me.  437,  that  the  warranty  is  broken 
as  soon  as  made,  and  that  the  Statute  of  Limitation  begins  to  run  from  the 
time  of  the  transfer,  that  is,  as  to  the  right  of  action  for  breach  of  warranty. 


TOWNSEND   V.   BUSH. 

Supreme  Court  of  Connecticut,  November,  1814.     1  Conn.  260. 

But  a  party  to  a  negotiable  instrument,  who  is  divested  of  interest,  is  competent  to 
prove  the  invalidity  of  the  paper. 

Assumpsit  against  Bush  as  acceptor  of  a  bill  of  exchange  drawn 
by  Ebenezer  and  Atwater  Townsend,  and  payable  to  the  plaintiffs 
or  order.  There  was  also  a  count  for  money  paid,  laid  out,  and  ex- 
pended for  the  defendant's  use.  Defence,  usury.  To  prove  this, 
the  defendant  offered  the  individuals  composing  the  firm  of  E.  & 
A.  Townsend  as  witnesses;  offering  also,  at  the  same  time,  to  show 
that  they  had  no  interest  in  this  suit,  being  discharged  from  all 
liability  on  the  bill  under  an  act  of  insolvency  in  the  State  of  New 
York.  The  plaintiffs  objected  on  the  ground  that  said  parties  were 
drawers  of  the  bill.  The  court  excluded  the  witnesses,  and  directed 
the  jury  to  find  a  verdict  for  the  plaintiffs ;  which  being  accordingly 
done,  the  defendant  moved  for  a  new  trial.  The  motion  was  re- 
served for  the  consideration  of  all  the  judges. 

[Argument  reported.] 

Trumbull,  J.  The  principal  question  in  this  case  is,  whether 
Ebenezer  and  Atwater  Townsend,  the  drawers  of  the  bill  in  question, 
are  admissible  witnesses  in  an  action  by  the  plaintiffs  as  payees  of  the 
bill  against  the  defendant  as  acceptor,  to  prove  that  it  was  executed 
on  an  usurious  contract,  and  therefore  is  void  in  law. 

The  rule  that  no  person  can  be  permitted  to  give  testimony  to 
invalidate  any  instrument  to  which  he  has  made  himself  a  party 
by  affixing  his  signature,  in  cases  wherein  he  has  no  interest  in  the 
event  of  the  suit  on  trial,  was  first  adopted  in  the  case  of  Walton  v. 
Shelley,  1  Durn.  &  East,  296,  by  Lord  Mansfield,  and  the  other 
judges  of  the  King's  Bench.  He  states  that  "  the  rule  is  founded  in 
public  policy ;  that  there  is  a  sound  reason  for  it,  because  every  man 
who  is  a  party  to  an  instrument  gives  a  credit  [to]  it;    that  it  is 


202  indorser's  contract. 

of  consequence  to  mankind  that  no  person  should  hang  out  false 
colors  to  deceive  them,  by  first  affixing  his  signature  to  a  paper, 
and  then  afterwards  giving  testimony  to  invalidate  it;  that  it  is 
emphatically  right  in  case  of  notes,  because,  in  consequence  of  dif- 
ferent statutes,  two  very  hard  cases  have  arisen:  first,  with  respect 
to  a  gaming  note,  which,  though  in  possession  of  a  bo7ia  fide  pur- 
chaser without  notice  is  void;  ^  and,  in  the  case  of  usury,  a  note  given 
for  a  usurious  consideration,  though  in  the  hands  of  a  fair  indorsee, 
is  equally  void;  and  therefore,  whenever  a  man  signs  these  instru- 
ments, he  is  always  understood  to  say  that  to  his  knowledge  there  is 
no  legal  objection  to  them  whatever."  He  then  quotes  the  maxim 
of  the  civil  law,  newo  suam  allegans  turpitudinem  est  audiendus, 
and  applies  it  as  conclusive  on  the  present  point.  The  other  judges 
concurred,  and  established  this  as  a  general  rule  of  law. 

The  English  courts  soon  found  the  principle  was  laid  down  on 
too  broad  a  scale,  and  narrowed  it  in  its  application  to  negotiable 
instruments  only.  No  new  or  additional  reasons  were  ever  adduced 
in  its  support.  It  was  adhered  to  on  the  grounds  stated  by  Lord 
Mansfield,  and  the  authority  of  the  decision  in  that  case.  But,  at 
length,  the  rule  was  exploded  in  the  King's  Bench,  and  such  a 
witness  determined  to  be  admissible,  unless  interested  in  the  event 
of  the  suit  on  trial.  See  Jordaine  v.  Lashbrooke,  7  Durn.  &  East, 
601. 

As  the  decisions  of  the  highest  court  and  ablest  judges  at  West- 
minster Hall  have  been  thus  directly  contradictor}^,  and  as  their 
principle  (notwithstanding  the  dicta  of  several  of  the  judges  in 
Allen  V.  Holkins,  1  Day's  Cases  in  Error,  p.  17,  adopting  the  rule 
as  sound  law,  and  the  decision  in  Webb  v.  Danforth,  p.  301,  denying 
its  application  as  to  facts  subsequent  to  the  execution  of  the  instru- 
ment) has  never  till  now  come  directly  in  question  before  the  highest 
courts  in  this  State,  it  is  our  duty  to  decide  it  according  to  the  gen- 
eral rules  and  principles  of  law  respecting  admissibility  of  testi- 
mony; and  if  the  grounds  and  reasons  in  Walton  v.  Shelley  are 
found  to  be  fallacious,  we  cannot  consider  the  case  and  its  authority 
conclusive. 

The  first  ground  Lord  Mansfield  takes  is,  that  every  person  who 
signs  an  instrument  thereby  gives  it  a  credit,  and  can  never  be  ad- 
mitted to  dispute  its  validity.  Before  we  adopt  this  principle  of 
universal  exclusion  and  estoppel,  we  must  inquire  what  credit  each 
several  party,  by  putting  his  signature  upon  a  negotiable  instrument, 
thereby  gives  to  it,  and  what  obligation  he  thereby  incurs;  for  each 
signer  stands  on  a  different  ground. 

The  drawer  of  a  bill  or  negotiable  note  acknowledges  himself  in- 

1  Statutes  in  this  conntry,  very  generally,  make  bills  or  notes  given  for  a  gaming 
consideration  void,  except  as  to  bona  Jide  purchasers.  See  Rev.  Laws,  Mass.,  ch.  99, 
§3. 


TOWNSEND   V.   BUSH.  203 

debted  to  the  payee  to  the  amount  of  the  sum  it  contains,  and  en- 
gages to  pay  the  damages,  in  case  the  bill  shall  be  dishonored,  or 
the  note  imcollected,  without  the  fault  of  the  payee  or  of  those  to 
whom  it  may  be  indorsed.  The  indorser  of  a  bill  or  note  acknowl- 
edges his  receipt  of  a  valuable  consideration,  and  contracts  to  pay 
the  sum,  in  case  it  cannot  be  obtained  of  the  drawer.  The  acceptor 
acknowledges  it  to  be  duly  drawn;  he  is  not  admitted  to  deny  the 
handwriting  of  the  drawer ;  and  he  contracts  to  pay  the  sum  accord- 
ing to  its  contents  to  the  legal  holder. 

These  are  the  rules  and  principles  of  common  law  as  adopted  and 
sanctioned  by  the  courts  in  this  State. 

The  indorsee  or  holder  of  a  negotiable  security  has  nothing  to 
do  with  the  transaction  between  the  original  parties.  See  Jordaine 
V.  Lashbrooke.  Nor  has  the  drawer  or  acceptor  anything  more  to 
do  with  the  contracts  between  subsequent  indorsers  and  indorsees. 
Each  party  is  bound  only  so  far  as  his  own  obligation  extends,  and 
cannot  be  precluded  from  denying  any  fact  not  acknowledged  by 
his  signature.     All  these  contracts  are  separate  and  independent. 

He  warrants  nothing  further  with  respect  to  the  validity  of  the 
draft,  he  hangs  out  no  false  colors,  and  is  not  estopped  by  his  sig- 
nature from  testifying  to  any  facts  respecting  the  instrument,  or  any 
legal  objections  within  his  knowledge. 

The  maxim  of  the  civil  law,  that  no  man  is  to  be  heard  who  alleges 
his  own  turpitude  or  crime,  was  never  by  any  court  or  judge,  before 
Lord  Mansfield,  applied  to  the  inadmissibility  of  a  witness,  but  only 
to  the  rights  of  the  parties  in  a  suit  or  action.  No  suitor  can  support 
a  claim  in  which  the  ground  or  consideration  is  an  unlawful  act 
of  his  own ;  nor  can  any  defendant  be  heard  on  a  defence  grounded 
on  his  own  unlawful  act.  But  an  accomplice  in  a  crime,  a  fraud,  or 
any  illegal  transaction,  was  always  an  admissible  witness,  unless 
immediately  interested  in  the  suit.  I  may  further  observe  that  the 
term  "  turpitude "  can  with  no  propriety  be  applied  to  an  act  not 
malum  in  se,  but  only  malum  prohibitum  by  force  of  some  statute, 
making  it  penal  in  some  particular  country  or  jurisdiction. 

In  Jordaine  v.  Lashbrooke,  Lord  Kenyon  says :  "  The  rule  con- 
tended for  is  this:  Whatever  fraud  may  have  been  committed,  if 
the  party  to  the  fraud  can  get  on  the  instrument  the  name  of  the 
person  who  may  be  the  only  witness  to  the  transaction,  he  will  stand 
entrenched  within  the  forms  of  law,  and  impose  silence  on  that  only 
witness,  though  he  be  a  person  of  unimpeachable  character,  and  not 
interested  in  the  cause."  This  he  denies  to  be  law.  Grose,  Justice, 
says :  "  Let  the  plaintiff  in  this  case  resort  to  his  indorser  to  recover 
back  the  consideration  he  gave  for  the  bill." 

Indeed,  if  a  man  sell  and  indorse  a  note  executed  by  an  infant, 


204  indorsee's  contract. 

or  feme  covert,  and  void  at  common  law,  or  void  by  statute  as  being 
usurious,  unstamped,  or  a  forgery,  I  see  no  legal  defence  he  can  set 
up  against  an  action  of  assumpsit  by  the  indorsee  for  the  money 
paid  on  a  consideration  which  has  wholly  failed.  For  that  is  not  an 
action  on  the  bill  or  note,  but  rests  entirely  on  the  ground  that  the 
note  is  void  in  law.  If  such  an  action  can  be  supported,  there  is  no 
hardship  in  the  case  of  an  innocent  purchaser;  he  has  his  remedy. 
If  in  any  case  he  is  deprived  of  every  legal  remedy,  no  court  can 
have  a  right,  in  compassion  to  the  hardship  of  his  situation,  to  assist 
him  in  evading  the  law  by  excluding  such  witnesses  or  evidence  as 
are  admissible  in  all  other  cases. 

The  hardship  upon  the  innocent  indorsee,  which  seems  so  strongly 
to  have  influenced  the  mind  of  Lord  Mansfield,  is  indeed  no  more 
than  this:  by  the  statutes  to  which  he  refers,  all  bills  or  notes, 
where  the  consideration  is  money  lent  on  usury  or  for  gaming,  are 
declared  void  to  all  intents  and  purposes  whatever;  and,  conse- 
quently, the  indorsee,  whenever  he  brings  his  suit  on  the  note  or  bill 
itself  against  the  drawer,  promisor,  or  acceptor,  must  fail  of  a 
recovery  in  that  action.  But  he  is  not  without  remedy;  for,  if  a 
fair  and  bona  fide  purchaser  without  notice,  he  may  recover  of  the 
indorser  on  his  indorsement.     Bowyer  v.  Bampton,  2  Stra.  1155. 

In  the  case  of  Lowe  and  others  v.  Waller,  Doug.  736,  in  which  all 
the  former  cases  are  well  considered,  Lord  Mansfield  himself  says: 
"  It  is  better  that  the  law  should  be  as  it  is  with  respect  to  bills  and 
notes  than  other  securities ;  because  they  are  generally  payable  in 
a  short  time,  so  that  the  indorsee  has  an  early  opportunity  of  re- 
curring to  the  indorser,  if  he  cannot  recover  on  the  bill."  I  am 
therefore  of  opinion  that  the  witnesses  offered  are  admissible,  not- 
withstanding they  have  put  their  signature  upon  the  bill.^ 

Smith  and  Swift,  JJ.,  delivered  concurring  opinions. 

1  See  contra,  Churchill  v.  Suter,  4  Mass.  156 ;  Thayer  v.  Grossman,  1  Met.  416.  The 
Massachusetts  court  makes  an  exception  to  the  rule,  excluding  the  party  as  a  witness, 
to  wit,  when  the  plaintiff  took  the  instrument  with  notice  of  the  invalidity.  Thayer  v. 
Grossman,  supra.    See  Bigelow,  Bills  and  Notes,  101,  102  and  note. 


MUSSON  V.   LAKE.  205 

[The  indorser's  conditional  engagement  is  that,  if  upon  present- 
ment and  demand  upon  the  party  bound  or  directed  to  pay,  the 
instrument  is  dishonored,  and  due  proceedings  on  dishonor  are  taken, 
he  will  pay  the  amount  of  the  instrument  to  the  holder.^] 

MUSSON   V.   LAKE. 
Supreme  Court  of  the  United  States,  December,  1845.    4  How.  262. 
There  mnst  be  a  presentment  ^  of  the  instrument  as  well  as  a  demand  of  payment.' 
The  case  is  stated  in  the  opinion  of  the  court. 

[Argument  not  reported.] 

McKiNLEY,  J.  The  plaintiffs  brought  an  action  of  assumpsit,  in 
the  Circuit  Court  of  the  United  States  for  the  Southern  District 
of  Mississippi,  against  the  defendant,  as  indorser  of  a  bill  of  ex- 
change, drawn  at  Vicksburg,  in  said  State,  by  Steele,  Jenkins,  &  Co., 
for  $6,133,  payable  twelve  months  after  the  first  day  of  February, 
1837,  to  K.  H.  and  J.  H.  Crump,  and  addressed  to  Kirkman,  Rosser, 
&  Co.,  at  New  Orleans,  and  by  them  afterwards  accepted,  and  in- 
dorsed by  the  payees  and  the  defendant. 

On  the  trial  of  the  cause,  the  plaintiffs  offered  to  read  as  evidence 
to  the  jury  a  protest  of  the  bill  of  exchange,  to  the  reading  of  which 
the  defendant  objected;  because  it  did  not  appear  in  the  protest 
that  the  notary  had  presented  the  bill  to  the  acceptors,  or  either  of 
them,  when  he  demanded  payment  thereof.  And  upon  the  question, 
whether  the  protest  ought  to  be  read  to  the  jury  as  evidence  of  a 
presentment  of  the  bill  to  the  acceptors  for  payment,  or  as  evidence 
of  the  dishonor  of  the  bill,  the  judges  were  opposed  in  opinion :  which 
division  of  opinion  they  ordered  to  be  certified  to  this  court;  and 
upon  that  certificate  the  question  is  now  before  us  for  determination. 

The  indorser  of  a  bill  of  exchange,  whether  payable  after  date 
or  after  sight,  undertakes  that  the  drawee  will  pay  it,  if  the  holder 
present  it  to  him  at  maturity  and  demand  payment;  and  if  he 
refuse  to  pay  it,  and  the  holder  cause  it  to  be  protested,  and  due 
notice  to  be  given  to  the  indorser,  then  he  promises  to  pay  it.  All 
these  conditions  enter  into  and  make  part  of  the  contract  between 
these  parties  to  a  foreign  bill  of  exchange;  and  the  law  imposes  the 
performance  of  them  upon  the  holder,  as  conditions  precedent  to 
the  liability  of  the  indorser  of  the  bill.    A  presentment  to  and  demand 

1  N.  I.  L.  §  83. 

2  Id.  §  91. 

'  While  this  is  the  point  particularly  to  he  illustrated,  the  student  should  carefully 
observe  the  requisites  and  effect  of  the  certificate  of  protest,  as  discussed  in  the 
opinion.  » 


206  indorser's  contract. 

of  pa}Tnent  must  be  made  of  the  acceptor  personally,  at  his  place  of 
business  or  his  dwelling.  Story,  Bills,  §  325.  Bankruptcy,  insol- 
vency, or  even  the  death  of  the  acceptor  will  not  excuse  the  neglect 
to  make  due  presentment;  and  in  the  latter  case  it  should  be  made 
to  the  personal  representatives  of  the  deceased.  Chitty,  Bills,  7th 
London  ed.,  246,  247;  Story,  Bills,  360;  5  Taunt.  30";  12  Wend. 
439;  2  Douglass,  515;  Warrington  v.  Furbor,  8  East,  242,  245; 
Esdaile  v.  Sowerby,  11  East,  117;   14  East,  500. 

The  reasons  why  presentment  should  be  made  to  the  drawee  are, 
first,  that  he  may  judge  of  the  genuineness  of  the  bill;  secondly, 
of  the  right  of  the  holder  to  receive  the  contents;  and,  thirdly, 
that  he  may  obtain  immediate  possession  of  the  bill  upon  paying  the 
amount.  And  the  acceptor  has  a  right  to  see  that  the  person  demand- 
ing payment  has  a  right  to  receive  it,  before  he  is  bound  to  answer 
whether  he  will  pay  it  or  not;  for,  notwithstanding  his  acceptance, 
it  may  have  passed  into  other  hands  before  its  maturity.  And  he, 
as  well  as  the  drawee,  has  a  right  to  the  possession  of  the  bill  upon 
paying  it,  to  be  used  as  a  voucher  in  the  settlement  of  accounts  with 
the  drawer.  Story,  Bills,  §  361 ;  Hansard  v.  Eobinson,  7  Barn. 
&  C.  90. 

Mr.  Justice  Story  has  given  the  form  of  a  protest  now  in  use  in 
England,  in  his  treatise  on  Bills  of  Exchange,  by  which  it  will  be 
seen  that  the  words  "  did  exhibit  said  bill "  are  used,  and  a  blank  is 
left  to  be  filled  up  with  "  the  presentment,  and  to  whom  made,  and  the 
reason,  if  assigned,  for  non-payment."  Story,  Bills,  302,  note.  This, 
with  the  authorities  already  referred  to,  shows  that  the  protest 
should  set  forth  the  presentment  of  the  bill,  the  demand  of  payment, 
and  the  answer  of  the  drawee  or  acceptor.  The  holder  of  the  bill 
is  the  proper  person  to  make  the  presentment  of  it  for  payment  or 
acceptance.  Story,  Bills,  §  360.  But  the  law  makes  the  notary  his 
agent  for  the  purpose  of  presenting  the  bill,  and  doing  whatever 
the  holder  is  bound  to  do  to  fix  the  liability  of  the  indorser.  Every- 
thing, therefore,  that  he  does  in  the  performance  of  this  duty  must 
appear  distinctly  in  his  protest.  He  is  the  officer  of  a  foreign 
government;  the  proceeding  is  ex  parte;  and  the  evidence  contained 
in  the  protest  is  credited  in  all  foreign  courts.  Chitty,  Bills,  215; 
Rogers  v.  Stevens,  2  T.  R.  713;  Brough  v.  Parkings,  2  Ld.  Raym. 
993;  Orr  v.  Maginnis,  7  East,  359;  Chesmer  v:  Noyes,  4  Camp. 
129.  The  evidence  contained  in  the  protest  must,  therefore,  stand 
or  fall  upon  its  own  merits.  It  rests  upon  the  same  footing  with 
parol  evidence;  and,  if  it  fails  to  make  full  proof  of  due  diligence 
on  the  part  of  the  plaintiff,  it  must  be  rejected. 

But  the  counsel  for  the  plaintiffs  insists  that  the  statute  of  Loui- 
siana and  the  interpretation  given  to  it  by  the  Supreme  Court  of 
that  State  in  the  case  of  Nott's  Executor  v.  Beard,  16  La.  308,  have 
so  changed  the  law  merchant  as  to  render  unnecessary  the  present- 


MUSSON   V.   LAKE.  207 

ment  of  a  foreign  bill  for  payment.  After  a  careful  examination 
of  the  opinion  of  the  court  in  that  case,  we  are  unable  to  perceive 
any  intention  manifested  to  depart  from  the  settled  usages  of  the 
law  merchant;  but,  on  the  contrary,  they  attempt  by  argument  and 
authority  to  bring  the  case  within  that  law.  The  question  before  that 
court  was  the  identical  question  now  before  us.  The  protest  was 
objected  to  because  it  did  not  show  that  the  bill  had  been  presented 
by  the  notary  to  the  acceptors  for  payment.  To  this  objection,  that 
court  said  it  might  perhaps  have  been  more  specific,  if,  in  the  protest, 
it  had  been  stated  that  the  bill  was  presented,  and  payment  thereof 
demanded.  And  they  admit  the  law  is  well  settled,  that,  before  the 
holder  of  an  accepted  bill  can  call  on  the  drawer  for  payment  he  must 
make  a  presentment  for,  or  demand  of  payment,  and  give  notice  of 
the  refusal.  Here,  then,  is  a  definite  proposition,  asserting  that  a 
presentment  for  payment  and  a  demand  of  payment  are  convertible 
terms,  and  that  the  proof  of  either  would  be  sufficient. 

To  support  this  proposition,  they  refer  to  Chitty  on  Bills,  and 
Bayley  on  Bills,  and  the  annotators  on  them.  And  as  further  proof 
and  illustration,  and  to  show  that  demand  of  payment  should  be  pre- 
ferred to  presentment  for  payment,  they  refer  to  the  statute  of 
Louisiana,  passed  in  1827,  in  which  they  say  the  word  "demand" 
is  used  in  it,  and  that  the  word  "  presentment  "  is  not ;  and  they  refer 
to  the  statute,  also  to  show  that  notaries  were  vested  with  certain 
powers  by  it,  which  gave  authority  to  their  acts;  and  that  they 
being  public  officers,  the  presumption  of  law  is,  that  they  do  their 
duty;  and  therefore,  if  the  protest  were  defective,  and  liable  to  the 
objection  urged  against  it,  this  presumption  of  law  would  cover  all 
such  defects.  This  is  substituting  presumption  for  proof,  in  viola- 
tion of  all  the  rules  of  evidence. 

"With  all  due  respect  for  that  distinguished  tribunal,  we  are  con- 
strained to  dissent  from  the  general  proposition  they  have  laid  down 
on  the  subject  of  demand  and  presentment,  and  from  all  their 
reasoning  in  support  of  it.  Due  diligence  is  a  question  of  law ;  and 
we  think  we  have  shown,  by  abundant  authority,  that  the  holder  of 
an  accepted  bill,  to  fix  the  liability  of  the  drawer  or  indorser,  must 
present  it  to  the  acceptor  and  demand  payment  thereof.  It  may 
be  well  here  to  repeat  what  Lord  Tenterden,  C.  J.,  said  on  this 
subject,  in  delivering  the  judgment  of  the  Court  of  King's  Bench, 
in  the  case  of  Hansard  v.  Eobinson,  before  referred  to.  He  said: 
"  The  general  rule  of  the  English  law  does  not  allow  a  suit  by  the 
assignee  of  a  chose  in  action.  The  custom  of  merchants,  considered 
as  part  of  the  law,  furnishes  in  this  case  an  exception  to  the  gen- 
eral rule.  What,  then,  is  the  custom  in  this  respect?  It  is,  that  the 
holder  of  the  bill  shall  present  the  instrument,  at  its  maturity,  to 
the  acceptor,  demand  payment  of  its  amount,  and,  upon  receipt  of 
the  money,  deliver  up  the  bill.     The  acceptor  paying  the  bill  has 


208  indorsee's  contract. 

a  right  to  the  possession  of  the  instrument  for  his  own  security, 
and  as  his  voucher  and  discharge  -pro  tanto,  in  his  account  with  the 
drawer.  If,  upon  an  offer  of  payment,  the  holder  should  refuse  to 
deliver  up  the  bill,  can  it  be  doubted  that  the  acceptor  might  retract 
his  offer,  or  retain  his  money  ?  "  This  extract,  we  think,  furnishes 
a  full  answer  to  all  that  has  been  said  by  the  Supreme  Court  of 
Louisiana  to  prove  that  it  is  not  necessary  to  present  the  bill  to  the 
acceptor  for  payment;  and  to  the  presumption  of  law  relied  on  to 
cure  the  defects  in  the  protest. 

But  to  show  that,  by  the  statute  of  Louisiana,  the  presentment 
of  a  bill  to  the  acceptor  for  payment  is  not  dispensed  with,  and  that 
the  presentment  is,  by  a  fair  construction  of  the  act,  as  much  within 
its  true  intent  and  meaning  as  the  demand,  we  proceed  to  examine 
its  provisions.  The  principal  object  of  the  legislature  in  passing 
this  statute  seems  to  have  been  to  give  authority  to  notaries  to  give 
notices,  in  all  cases  of  protested  bills  and  promissory  notes;  and  to 
make  their  certificates  evidence  of  such  notices.^  And,  therefore, 
all  that  is  said  on  the  subject  of  the  demand  and  the  manner  of 
making  it,  and  the  other  circumstances  attending  it,  was  not  in- 
tended as  a  new  enactment  on  these  subjects,  but  as  inducement  to 
the  powers  conferred  on  the  notary,  which  was  the  principal  object 
of  the  statute,  as  will  appear,  we  think,  by  reading  it.  That  part 
of  it  which  relates  to  this  subject  is  in  these  words :  "  That  all 
notaries,  and  persons  acting  as  such,  are  authorized,  in  their  protests 
of  bills  of  exchange,  promissory  notes,  and  orders  for  the  payment 
of  money,  to  make  mention  of  the  demand  made  upon  the  drawee, 
acceptor,  or  person  on  whom  such  order  or  bill  of  exchange  is  drawn 
or  given,  and  of  the  manner  and  circumstances  of  such  demand ;  and 
by  certificate,  added  to  such  protest,  to  state  the  manner  in  which 
any  notices  of  protest  to  drawers,  indorsers,  or  other  persons  inter- 
ested were  served  or  forwarded;  and  whenever  they  shall  have  so 
done,  a  certified  copy  of  such  protest  and  certificate  shall  be  evidence 
of  all  the  notices  therein  stated." 

It  seems  to  have  been  taken  for  granted  by  the  legislature  that 
the  notaries  knew  how  to  make  out  a  protest,  and  therefore  they 
did  not  prescribe  the  form,  but  gave  the  substance  of  it,  to  which 
the  notary  was  required  to  add  a  certificate  of  the  manner  in  which 
he  had  given  notices;  and  when  done,  according  to  the  statute, 
a  certified  copy  of  the  protest  and  certificate  should  be  evidence,  not 
of  the  demand  and  manner  and  circumstances  of  the  demand,  but 
of  the  notice  only.  This  shows  that  the  intention  of  the  legislature, 
in  passing  this  part  of  the  statute,  was  merely  to  authorize  the 
notaries  to  give  notices,  and  to  make  the  copy  of  the  protest,  and 
the  certificate  added  to  it,  evidence  of  notice  in  the  courts  of  Loui- 

^  Cf.  Bey.  Laws  of  Masa.  ch.  73,  §  13. 


MUSSON   V.   LAKE.  209 

siana.  But,  independent  of  this  view  of  the  subject,  we  think  the 
language  employed  in  this  statute  includes  the  presentment  of  the  bill 
for  payment,  and  for  all  other  purposes,  as  fully  as  it  does  the  de- 
mand of  payment.  In  giving  construction  to  the  act,  the  phrase, 
"  and  of  the  manner  and  circumstances  of  such  demand,"  cannot  be 
rejected,  but  must  receive  a  fair  interpretation.  When  taken  in  con- 
nection with  other  parts  of  the  statute,  what  do  these  words  mean? 
The  manner  of  making  a  demand  of  pa}Tnent,  we  have  seen,  is  by 
presenting  the  bill  to  the  drawee  or  acceptor;  and  so  important 
is  this  part  of  the  proceeding,  that  the  omission  to  present  the  bill 
to  the  acceptor  will  justify  his  refusal  to  pay  it,  although  payment  be 
demanded.  The  legislature  cannot  be  presumed  to  have  intended  to 
make  so  important  a  change  in  the  law  merchant  as  that  ascribed 
to  them  by  the  counsel  for  the  plaintiffs,  without  at  the  same  time 
providing  some  other  mode  of  obtaining  the  acceptance  and  pay- 
ment of  bills  of  exchange,  and  of  holding  drawers  and  indorsers  to 
their  liabilities.  It  is  but  reasonable,  therefore,  to  give  to  the  phrase 
before  referred  to  such  construction,  if  practicable,  as  will  leave  the 
law  merchant  as  it  stood  before  the  passage  of  the  statute,  and  carry 
into  effect  the  main  intention  of  the  legislature.  This,  we  think, 
may  fairly  be  done  without  doing  any  violence  to  the  intention  or 
the  language  of  the  statute. 

The  manner  of  the  demand  must,  therefore,  mean  the  presentment 
of  the  bill  for  either  acceptance  or  payment ;  and  the  circumstances 
of  the  demand,  we  think,  means  the  place  where  the  presentment 
and  demand  is  made,  and  the  person  to  whom  or  of  whom  it  is  made, 
and  the  answer  made  by  such  person.  It  is  very  clear,  that  bills 
payable  at  sight,  and  after  sight,  are  within  the  meaning  of  the 
statute ;  because  it  provides  for  a  demand  of  payment  of  the  acceptor 
of  a  bill.  Now,  how  can  there  be  an  acceptor  of  a  bill,  without  a 
presentment  for  acceptance?  Until  the  bill  become  due,  payment 
cannot  be  demanded  of  the  drawee.  This  shows  that,  without  the 
word  "  presentment "  and  the  word  "  demand  "  also,  the  plain  mean- 
ing of  the  statute  could  not  be  carried  into  effect.  A  bill  payable  at 
a  fixed  period  after  its  date  need  not  be  presented  for  acceptance :  * 
it  is  sufficient  to  present  it  and  demand  payment  when  it  arrives  at 
maturity;  but  a  bill  payable  at  sight,  or  after  sight,  can  never 
become  due  until  after  it  has  been  accepted.^  How  is  the  holder  or 
the  notary  to  obtain  the  acceptance  of  such  a  bill,  under  the  decision 
of  the  Supreme  Court  of  Louisiana  ?  Will  it  be  sufficient  to  demand 
payment  of  the  bill?  That  would  be  a  nugatory  act,  because  it  is 
not  due;  then  it  must  be  admitted  that,  by  fair  and  necessary  con- 
struction, the  word  "  presentment "  is  within  the  plain  meaning  and 
intention  of  the  statute,  and  that  the  bill  may  be  presented  for 
acceptance  or  for  payment,  and  therefore  neither  the  statute  nor 
1  N.  I.  L.  §  160.  2  Id. 

14 


210  indorsee's  contract. 

the  decision  of  the  Supreme  Court  of  Louisiana  has  changed  the 
law  merchant  in  any  of  these  respects. 

There  is,  however,  another  question,  entirely  independent  of  the 
statute  and  the  decision  of  the  Supreme  Court  of  Louisiana,  which 
may  be  decisive  of  the  case  before  this  court;  and  that  question  is, 
whether  the  contract  between  the  holder  and  indorser  of  the  bill 
in  controversy  is  to  be  governed  by  the  law  of  Louisiana,  where  the 
bill  was  payable,  or  by  the  law  of  Mississippi,  where  it  was  drawn  and 
indorsed.  The  place  where  the  contract  is  to  be  performed  is  to 
govern  the  liabilities  of  the  person  who  has  undertaken  to  perform  it. 
The  acceptors  resided  at  New  Orleans;  they  became  parties  to  the 
bill  by  accepting  it  there.  So  far,  therefore,  as  their  liabilities 
were  concerned,  they  were  governed  by  the  law  of  Louisiana.  But 
the  drawers  and  indorsers  resided  in  Mississippi ;  the  bill  was  drawn 
and  indorsed  there ;  and  their  liabilities,  if  any,  accrued  there.  The 
undertaking  of  the  defendant  was,  as  before  stated,  that  the  drawers 
should  pay  the  bill;  and  that  if  the  holder,  after  using  due  diligence, 
failed  to  obtain  payment  from  them,  he  would  pay  it,  with  interest 
and  damages.  This  part  of  the  contract  was,  by  the  agreement  of 
the  parties,  to  be  performed  in  Mississippi,  where  the  suit  was 
brought,  and  is  now  depending.  The  construction  of  the  contract,  and 
the  diligence  necessary  to  be  used  by  the  plaintiffs  to  entitle  them 
to  a  recovery,  must,  therefore,  be  governed  by  the  laws  of  the  latter 
State.  Story,  Bills,  §  366;  4  Peters,  123;  3  Kent,  Comm.  459; 
13  Mass.  4;  13  Wend.  439;  Story,  Bills,  §  76;  4  Johns.  119;  13 
Johns.  142;  5  East,  124;  3  Mass.  81;  3  Cowen,  154;  1  Cowen, 
107;    5  Cranch,  298. 

Whatever,  therefore,  may  have  been  the  intention  of  the  legis- 
lature in  passing  the  statute,  and  of  the  Supreme  Court  of  Louisiana 
in  the  decision  of  the  case  referred  to,  neither  can  affect,  in  the 
slightest  degree,  the  case  before  us.  In  Mississippi,  the  custom  of 
merchants  has  been  adopted  as  part  of  the  common  law ;  and  by  that 
law  and  their  statute  law  this  case  must  be  governed.  We  think, 
therefore,  the  protest  offered  by  the  plaintiff,  as  evidence  to  the  jury, 
ouglit  not  to  have  been  received  as  evidence  of  presentment  of  the  bill 
to  the  acceptors  for  payment,  nor  as  evidence  of  the  dishonor  of  the 
bill ;  which  is  ordered  to  be  certified  to  the  Circuit  Court  accordingly. 

Note.  —  McLean  and  Woodbury,  JJ.,  dissented  as  to  the  effect  of  the 
protest,  regarding  it  as  sufficient  evidence  of  presentment.  They  acrreed  with 
ttie  majority  as  to  the  necessity  of  presentment,  the  chief  point  to  be  illustrated 
here. 


FREEMAN  V.   BOYNTON.  211 


FKEEMAN   v.   BOYNTON. 

Supreme  Court  of  Massachusetts,  June,  1811.    7  Mass.  483. 

To  make  a  proper  presentment  and  demand,  the  holder  must  have  the  instrument 
in  his  possession,  if  it  is  not  lost  or  destroyed.^ 

This  was  an  action  of  assumpsit,  brought  by  the  plaintiffs  as 
indorsees  of  a  promissory  note,  dated  at  Boston,  September  4,  1806, 
by  which  one  Joseph  Boynton  promised  the  defendant  to  pay  him  or 
his  order  $902.16  in  nine  months  from  the  date,  with  interest  after 
six  months,  and  which  the  defendant  indorsed  to  the  plaintiffs. 

On  non  assumpsit  pleaded,  the  cause  was  tried  before  Thatcher, 
J.,  at  the  last  September  term  in  this  county.  At  the  trial,  neither 
the  making  nor  the  indorsement  of  the  note  was  denied;  the  whole 
question  being  whether  the  plaintiffs  had  used  due  diligence  in 
demanding  payment  of  the  promisor,  and  in  giving  notice  to  the 
indorser,  so  as  to  make  him  liable. 

On  this  point  the  evidence  was,  that  on  the  9th  or  10th  of  June, 
1807,  a  copy  of  the  note,  with  a  protest  made  by  a  notary  public  at 
Boston,  was  transmitted  to  Mr.  Merrill,  an  attorney  of  this  court, 
living  at  Wiscasset,  who  immediately  called  on  the  promisor,  and 
demanded  payment,  which  was  refused ;  but  he  gave  no  notice  at  that 
time  to  the  defendant,  the  indorser.  On  the  3d  of  July  following, 
Mr.  Merrill,  having  then  with  him  the  original  note,  again  called  on 
the  promisor,  and  demanded  payment,  which  was  refused;  and  on 
the  same  day  he  went  to  the  house  of  the  defendant,  the  indorser 
(both  promisor  and  indorser  being  inhabitants  of  Wiscasset),  and 
informed  the  defendant's  wife  of  the  non-payment  of  the  note  by  the 
promisor;  and  he  also  left  a  letter  at  the  house,  directed  to  the 
defendant,  and  giving  him  the  same  information ;  the  defendant  then 
being,  and  having  been  for  several  months  at  sea, 

A  verdict  was  taken  by  consent,  for  the  plaintiffs,  subject  to  the 
opinion  of  the  court  upon  the  above  facts  reported  by  the  judge  who 
sat  at  the  trial.  If,  upon  these  facts,  the  court  should  be  of  opinion 
that  the  plaintiffs  are  entitled  by  law  to  maintain  their  action,  thev 
were  to  have  judgment  on  the  verdict;  otherwise  the  verdict  was  to 
be  set  aside,  and  they  were  to  become  nonsuit. 

[Argument  reported.] 

Parker,  J.  The  question  submitted  to  the  court  in  this  case  is 
whether  the  plaintiffs  have  made  use  of  due  diligence,  in  demanding 
payment  of  the  promisor,  and  in  giving  notice  to  the  indorser,  so  as 
to  make  him  liable.  (Here  the  judge  recited  the  facts  from  the 
report  of  the  trial,  and  proceeded:) 

1  Cf.  N.  I.  L.  §  177,  providing  that  where  a  bill  of  exchange  is  lost  or  destroyed, 
protest  may  be  made  on  a  copy. 


212  indorsee's  contract. 

The  demand  made  by  Mr.  Merrill,  on  the  9th  or  10th  of  June,  was 
seasonable;  for,  as  the  holders  of  the  note  lived  in  Boston,  and  the 
promisor  and  indorser  at  Wiscasset,  a  distance  of  near  two  hundred 
miles,  a  reasonable  time  should  be  allowed,  after  the  note  became 
due,  to  transmit  it,  the  indorsees  having  a  right  to  wait  for  pa3Tnent 
to  them  in  Boston,  before  they  were  obliged  to  follow  the  maker  to 
his  home,  to  make  the  demand. 

But  this  demand  was  ineffectual  for  two  reasons:  1.  Because 
Merrill  had  not  the  note  with  him,  to  deliver  it  up  on  receiving  pay- 
ment; and,  2.  Because  no  notice  was  given  to  the  indorser  of  the 
refusal  to  pay. 

Whenever  a  demand  of  payment  is  made,  the  person  making  the 
demand  should  have  with  him  the  evidence  of  the  debt ;  for  otherwise 
the  debtor  may  well  refuse  to  pay,  on  the  ground  that  he  has  a  right 
to  have  his  obligation  or  contract,  or  to  see  it  cancelled,  when  he  is 
called  upon  to  discharge  it.  And  this  rule  will  especially  apply  to 
negotiable  securities,  which  may  be  legally  transferred  to  another, 
at  the  very  time  the  original  payee  makes  his  demand  of  payment. 

This  rule  may  admit  of  exceptions;  as  where  the  security  may  be 
lost;  in  which  case  a  tender  of  sufficient  indemnity  would  make  the 
demand  valid,  without  producing  the  security;  and  where,  from  the 
usual  course  of  business,  of  which  the  parties  are  conusant,  the  secur- 
ity may  be  lodged  in  some  bank,  whose  officers  shall  demand  paj^ment 
and  give  notice  to  the  indorser,  according  to  the  custom  of  such 
banks;  the  security  not  being  presented  at  the  time  of  the  demand, 
but  the  parties  being  presumed  to  know  where  it  may  be  found. 

There  is  nothing  in  this  case,  whereby  an  exception  to  the  general 
rule  can  be  created.  But  had  this  demand  been  sufficient,  still  it 
would  not  affect  the  indorser,  he  having  had  no  notice  whatever,  that 
it  had  been  made. 

The  objection  to  the  demand,  on  the  ground  that  Mr.  Merrill  had 
not  a  letter  of  attorney  from  the  indorsees,  would  not  have  prevailed. 
A  letter,  or  even  a  verbal  request,  from  the  holders  of  the  note  being 
sufficient  to  authorize  him  to  make  the  demand,  if  he  had  held  the 
note,  and  been  able  to  deliver  it  up  on  receipt  of  its  contents. 

Then  the  question  is,  whether  the  demand  made  by  Merrill,  with 
the  original  note  in  his  hand,  on  the  3d  of  July,  1807,  which  wanted 
but  one  day  of  being  a  month  after  the  note  became  due,  and  of 
which,  and  of  the  refusal  to  pay,  immediate  notice  was  given  to  the 
indorser,  in  the  best  manner  circumstances  would  admit  of,  he  being 
absent  at  sea,  was  within  a  reasonable  time,  so  as  to  charge  the  in- 
dorser? And  we  are  all  of  opinion  that  it  was  not;  there  being  no 
sufficient  excuse  given  for  so  long  a  delay,  a  regular  mail  being  estab- 
lished between  Wiscasset  and  Boston,  by  which  letters  may  be  safely 
transmitted  in  a  time  not  exceeding  three  days. 

Even  if  the  mistake  of  the  plaintiffs,  in  not  sending  down  the  note 


TAYLOR   V.    SNYDEK.  213 

when  they  directed  the  first  demand,  or  of  Merrill  in  neglecting  at 
that  time  to  notify  the  indorser,  should  have  authorized  a  subsequent 
demand,  in  order  to  charge  the  indorser,  yet  no  reason  whatever  can 
be  furnished  for  suffering  twenty-five  days  to  elapse  between  the  two 
demands.  It  is  important  to  the  interests  of  the  community,  that  the 
law,  which  requires  diligence  in  the  holder  of  securities,  to  enable 
him  to  exact  payment,  from  one  who  is  only  conditionally  liable, 
should  be  strictly  enforced. 

But  the  plaintiffs  have  further  relied  upon  a  supposed  demand 
made  by  a  notary  at  a  house  in  Boston,  where  the  promisor  had  once 
boarded.  This  was  altogether  nugatory,  it  appearing  from  the  report 
that  both  promisor  and  indorser  lived  at  Wiscasset;  and  it  not  ap- 
pearing that  the  promisor  had  any  place  of  business  in  Boston,  or 
that  the  note  was  payable  there.  And  even  if  any  weight  could  pos- 
sibly be  attached  to  this  kind  of  demand,  it  could  not  avail  against 
the  indorser,  for  he  had  no  notice  of  it. 

We  are  all,  therefore,  of  opinion  that  the  verdict  must  be  set  aside, 
and  the  plaintiffs  become  nonsuit. 


TAYLOK   V.    SNYDER. 

Supreme  Court  of  New  York,  May,  1846.     3  Denio,  145. 

The  place  of  date  of  a  promissory  note,  payable  generally,  is  only  prima  facie  the 
place  of  payment ;  if  the  maker  is  known  to  reside  elsewhere,  presentment  must  l>e 
made  accordingly,  as  where,  at  the  execution  of  the  note,  he  was  known  by  the  holder 
to  reside  in  another  State,  Presentment  should  be  made  at  the  place  of  business 
or  residence.! 

Assumpsit  against  the  indorser  of  a  promissory  note,  payable  gen- 
erally, but  dated  at  Troy,  New  York,  at  which  place  presentment  for 
payment  was  made,  the  maker  being  a  resident  of  Florida.  The 
plaintiff  was  nonsuited.  Motion  for  new  trial.  The  facts  appear  in 
the  opinion. 

[Argument  not  reported.] 

Beardslet,  J.  As  the  note  bears  date  at  Troy,  it  is  presumed  to 
have  been  made  at  that  place,  although  the  maker  then  resided  in 
Florida,  as  was  well  known  to  the  original  holder,  Morris,  and  to 
Stevenson,  to  whom  it  was  subsequently  transferred.  The  residence 
of  the  maker  had  not  been  changed  when  the  note  fell  due,  his  dom- 
icile still  being  in  Florida. 

The  indorser  resided  in  Troy.     It  was  not  shown  that  he  ever 

1  N.  I.  L.  §  90. 


214  indorsee's  contract. 

owned  the  note,  or  was  under  any  other  obligation  for  its  payment 
than  that  of  an  ordinary  indorser ;  and  it  may  fairly  be  inferred  from 
the  case  that  the  note  was  given  for  a  debt  due  from  the  maker  to 
Morris,  and  was  indorsed  for  his  benefit  at  the  request  of  the  maker. 

Some  months  before  the  note  fell  due,  the  indorser  had  been  asked 
by  the  then  holder,  Morris,  if  it  would  be  paid  at  maturity,  to  which 
he  replied  that  it  would  be ;  that  his  brother,  the  maker,  would  send 
the  money  to  him,  and  he  should  see  the  note  was  paid.  But  on  being 
requested  to  stipulate,  absolutely,  to  pay  the  note  himself,  he  de- 
clined to  do  so.  It  does  not  appear  that  on  this  or  any  other  occasion 
anything  was  said  as  to  the  place  where  pa}Tnent  would  be  made,  or 
where  the  note  should  be  presented  for  payment  at  maturity. 

Upon  the  evidence  as  stated  in  the  case,  I  think  it  cannot  be  said 
that  anything  has  been  done  by  the  indorser  to  change  or  affect  his 
original  liability  or  his  rights,  in  that  character.  He  had  not  desig- 
nated any  particular  place  in  Troy,  or  that  city  at  large,  as  the  place 
at  which  the  note  would  be  paid,  or  where  demand  should  be  made, 
nor  had  he  been  requested  to  designate  any  place  for  that  purpose. 
And  although  he  certainly  gave  a  strong  assurance  that  the  maker 
would  remit  the  money  to  him,  and  therefore  that  the  note  would  be 
duly  paid,  he  at  the  same  time  refused  to  bind  himself  absolutely 
for  its  payment.  He  chose  to  leave  his  own  responsibility  where  his 
contract  and  the  law  had  placed  it ;  and  no  one  had  a  right  to  under-  \ 
stand  from  what  he  said  that  he  intended  to  assume  any  new  obliga-  \ 
tion,  or  to  dispense  with  the  performance  of  any  act  which  the  law 
required  the  holder  of  the  note  to  perform.  It  does  not  appear  to 
have  been  suggested  on  the  trial  that  the  action  was  to  be  sustained 
on  any  such  ground,  nor  was  the  judge  requested  to  submit  the  ques- 
tion of  a  waiver  of  demand  of  payment,  by  the  indorser,  to  the  jury. 
It  was  doubtless  then  urged,  as  it  was  on  the  argument  at  bar,  that 
'this  note  was  by  law  payable  at  Troy,  and  therefore  the  defendant 
had  been  duly  charged  as  indorser,  and  not  that  he  had  in  any  man- 
ner waived  a  demand  at  the  proper  place. 

What,  then,  is  this  case?  A  debtor,  whose  residence  is  in  Florida, 
being  at  Troy,  makes  a  note,  which  he  dates  at  that  place,  to  his 
creditor,  a  resident  of  this  State,  for  an  amount  due  to  him,  and  pro- 
cures a  friend  residing  at  Troy  to  indorse  the  same.  No  place  of  pay- 
ment is  specified  in  the  note,  nor  is  there  anything  to  indicate  a  place, 
unless  that  follows  from  the  note  bearing  date  at  Troy.  The  holder 
knows  the  residence  of  the  maker  to  be  in  Florida,  but  when  the  note 
falls  dup^  instead  of  making  demand  of  the  maker  personally,  or  at 
his  residence  or  place  of  business  in  Florida,  payment  is  demanded  at 
Troy  and  not  elsewhere.  Was  this  a  sufficient  demand  as  respects  the 
indorser?  It  clearly  was,  if  the  note  was  by  law  payable  at  that  place, 
and  it  as  clearly  was  not,  if  the  note  was  payable  elsewhere.  This  is 
the  only  question  to  be  determined. 


TAYLOR  V.   SNYDER.  215 

The  date  of  a  note  at  a  particular  place  does  not  make  that  the  i 
place  of  payment,  or  at  which  payment  should  be  demanded  for  the 
purpose  of  charging  the  indorser.  This  was  expressly  adjudged  in 
the  case  of  Anderson  v.  Drake,  14  Johns.  114.  That  was  an  action 
against  the  indorser  of  a  promissory  note,  bearing  date  in  the  city  of 
New  York,  but  not  made  payable  at  any  particular  place.  When  the 
note  was  made,  the  maker  lived  in  New  York ;  but  before  it  fell  due 
he  removed  to  Kingston  in  the  county  of  Ulster.  The  counsel  for 
the  plaintiff  insisted  "  that  as  the  note  was  dated  in  New  York,  and 
the  parties  resided  there  at  the  time  it  was  made,  it  must  be  pre- 
sumed, no  particular  place  being  designated  for  the  payment,  that  it 
was  payable  in  New  York ;  that  the  removal  of  the  maker  from  New 
York  to  any  other  place  did  not  render  it  necessary  for  the  holder  to 
follow  him  for  the  purpose  of  demanding  payment."  But  the  court 
thought  otherwise,  and  held  that  a  demand  of  the  maker  personally, 
or  at  his  residence  or  place  of  business  in  Kingston,  as  in  ordinary 
cases,  was  necessary,  and  that  the  indorser  could  not  be  charged  upon 
a  demand  made  in  the  city  of  New  York,  although  the  note  bore 
date  at  that  place.  This  I  understand  to  be  the  settled  and  invariable 
rule  where  the  maker  has  not  removed  from  the  State,  but  has  a 
known  residence  within  its  limits.  Where,  after  a  note  has  been 
given,  the  maker  absconds,  removes  into  another  State  or  country,  or 
is  without  a  fixed  residence  anywhere,  other  principles,  as  we  shall 
see,  apply;  but  in  no  case  does  the  date  of  a  note,  of  itself,  make  that 
the  place  where  payment  should  be  demanded  in  order  to  charge  the 
indorser. 

It  has  been  supposed  that  the  case  of  Stewart  v.  Eden,  2  Caines, 
121,  countenances  a  different  doctrine.  Livingston,  J.,  there  said, 
"  The  note  being  dated  in  New  York,  the  maker  and  indorser  are 
presumed  to  have  resided,  and  contemplated  payment,  there."  This 
remark  was  in  part  strictly  correct,  for  the  date  of  the  note  was  pre- 
sumptive evidence  of  residence;  and  in  a  general  sense  it  may  also 
be  true  that  the  date  raises  a  presumption  that  the  parties  contem- 
plated payment  at  that  place.  Judge  Livingston  did  not  say  that 
the  note  was  by  law  payable  at  the  place  of  its  date ;  on  the  contrary, 
the  form  of  expression  conclusively  repels  that  idea.  He  was  not 
speaking  of  what  the  parties  were  bound  to  do  by  the  terms  of  the 
note,  of  their  legal  obligations  flowing  from  their  engagements  as 
maker  and  indorser,  but  simply  of  what  they  were  presumed  to  have 
contemplated.  If  the  learned  judge  intended  to  affirm  that  a  note, 
when  no  particular  place  of  payment  is  otherwise  indicated,  is  by  law 
payable  at  the  place  where  dated,  he  would  have  said  so  in  direct 
terms,  and  would  not  have  said  it  was  to  be  presumed  payment  at 
that  place  was  contemplated.  This  would  have  been  absurd.  But  in 
truth  the  question  whether  the  note  in  that  case  was  payable  where  it 
bore  date  was  not  before  the  court,  nor  was  it  there  pretended  that 


216  INDORSE  U'S   CONTRACT. 

payment  had  not  been  duly  demanded.  It  was  an  action  against  the 
representatives  of  a  deceased  indorser;  and  although  an  objection 
was  taken  to  the  form  in  which  the  presentment  for  payment  was 
alleged  in  the  declaration,  it  was  not  pretended  by  any  one  that  the 
demand  of  payment  had  not  been  strictly  correct.  The  main  ques- 
tion in  the  case  was  as  to  the  sufficiency  of  the  notice  to  the  indorser, 
and  the  remark  of  the  judge  was  made  in  discussing  that  point.  I 
admit  that  upon  the  question  of  due  diligence  in  giving  notice  to  an 
indorser,  it  may  have  been  very  pertinent  and  proper  to  say  that  the 
parties  are  presumed  to  have  contemplated  payment  at  the  place 
where  the  note  was  given  and  was  dated,  although  such  a  remark 
would  be  altogether  out  of  place  in  deciding  upon  the  construction 
of  an  agreement,  and  whether  the  parties,  by  its  terms,  were  bound  to 
make  payment  at  a  particular  place.  There  is  nothing  therefore  in 
this  remark  of  Judge  Livingston  which  can  be  made  to  countenance 
the  idea  that  a  note,  when  no  other  place  of  payment  is  specified,  is 
by  law  payable  at  the  place  of  its  date.  Anderson  v.  Drake,  supra; 
Bank  of  America  v.  AVoodworth,  18  Johns.  315,  322. 

Where  a  promissory  note  is  not  made  payable  at  any  particular 
place,  the  general  rule  of  law  is,  that  in  order  to  charge  the  indorser 
payment  must  be  demanded  of  "  the  maker  personally,  or  at  his 
dwelling-house,  or  other  place  of  abode,  or  at  his  counting-house  or 
place  of  business."  Story,  Promissory  Notes,  §  235;  Bank  of 
America  v.  Woodworth,  18  Johns.  315;  s.  c,  in  error,  19  Johns.  391. 
But  although  such  is  the  general  rule,  yet,  under  various  circum- 
stances, a  demand  in  any  form  or  manner  may  be  dispensed  with. 
It  is  a  question  of  diligence,  and  if  a  demand  is  found  to  be  imprac- 
ticable, proper  efforts  for  that  purpose  having  been  made,  the  indorser 
will  still  be  held  liable,  due  notice  having  been  given  to  him  by  the 
holder. 

Thus,  where  the  maker  has  absconded,  that  will  ordinarily  excuse 
a  demand,  and  notice  of  the  fact  is  sufficient  to  hold  the  indorser. 
1  Ld.  Raym.  443,  743 ;  3  Kent,  5th  ed.,  96 ;  Putnam  v.  Sullivan, 
4  Mass.  45,  53 ;  Lehman  v.  Jones,  1  Watts  &  S.  126 ;  Chitty,  Bills, 
10th  Am.  ed.,  354,  n.  1 ;  Story,  Promissory  Notes,  §  237. 

"WTiere  the  maker  is  a  seaman  on  a  voyage,  having  no  domicile  in 
the  State,  the  indorser  is  liable  without  a  demand  being  made. 
Barrett  v.  Wills,  4  Leigh,  114.  But,  although  the  maker  may  be 
absent  on  a  voyage,  if  he  has  a  domicile  in  the  State,  payment  must 
be  demanded  there.  Dennie  v.  Walker,  7  N.  H.  199;  "\A'Tiittier  v. 
Graffam,  3  Greenl.  82. 

And  in  every  case  where  the  maker  has  no  known  residence  or  place 
at  which  the  note  can  be  presented  for  payment,  the  holder  will  in 
like  manner  be  excused  from  making  any  demand  whatever.  ■  Story, 
Promissory  Notes,  §  237;  Whittier  v.  Graffam,  supra;  Putnam  v. 
Sullivan,  supra;  Duncan  v.  McCullough,  4  Serg.  &  Eawle,  480.    But, 


TAYLOR   V.   SNYDER.  217 

in  all  such  cases,  the  reason  for  not  making  a  demand  must  be  shown 
on  the  trial  of  the  cause.  It  must  appear  that  the  maker  had  ab- 
sconded, was  at  sea,  or  had  no  known  domicile  or  place  where  the 
note  should  be  presented.  The  rule  is  strict,  that  a  demand  must  be 
made,  or  a  proper  excuse  shown  for  its  omission. 

There  is  a  further  exception  to  the  rule  requiring  a  demand  to  be 
made  of  the  maker,  or  at  his  domicile  or  place  of  business ;  for  where 
a  note  is  made  by  a  resident  of  the  State,  who,  before  it  is  payable, 
removes  from  the  State  and  takes  up  a  permanent  residence  else- 
where, the  holder  need  not  follow  him  to  make  demand,  but  it  is 
sufficient  to  present  the  note  for  payment  at  the  former  place  of 
residence  of  the  maker,  McGruder  v.  Bank  of  Washington,  9  Wlieat. 
598,  post;  Anderson  v.  Drake,  supra;  Dennie  v.  Walker,  supra; 
Gillespie  v.  Hannahan,  4  McCord,  503;  Reid  v.  Morrison,  2  Watts 
&  S.  401;  3  Kent,  96.  And  this  is  just;  for  it  is  but  reasonable  to 
suppose  that  neither  party,  when  the  note  was  given,  looked  for  a 
change  of  residence  to  a  foreign  country,  and  that  each  contracted 
upon  the  supposition  that  no  such  change  would  take  place.  Never- 
theless, as  was  said  in  Dennie  v.  Walker,  supra,  "  this  is  an  exception 
to  the  general  rule,  and  must  be  construed  strictly."  "  We  think," 
say  the  court  in  McGruder  v.  Bank  of  Washington,  supra,  "  that 
reason  and  convenience  are  in  favor  of  sustaining  the  doctrine  that 
such  a  removal  is  an  excuse  from  actual  demand.  Precision  and  cer- 
tainty are  often  of  more  importance  to  the  rules  of  law  than  their 
abstract  justice.  On  this  point,  there  is  no  other  rule  that  can  be 
laid  down  which  will  not  leave  too  much  latitude  as  to  place  and 
distance.  Besides  which,  it  is  consistent  with  analogy  to  other  cases 
that  the  indorser  should  stand  committed,  in  this  respect,  by  the 
conduct  of  the  maker.  For  his  absconding  or  removal  out  of  the 
kingdom,  the  indorser  is  held,  in  England,  to  stand  committed." 

These  exceptions  to  the  general  rule,  it  will  be  seen,  all  rest  on 
peculiar  reasons.  In  one,  the  maker  has  absconded;  in  another, 
he  is  temporarily  absent,  and  has  no  domicile  or  place  of  business 
within  the  State;  in  a  third,  his  residence,  if  any  he  has,  cannot  be 
"ascertained;  while  in  the  fourth,  he  has  removed  out  of  the  State 
and  taken  up  his  residence  in  another  country.  In  each  of  these 
instances,  let  it  be  observed,  the  fact  constituting  the  excuse  occurs 
subsequently  to  the  making  and  indorsement  of  the  note;  and  it  is 
this  new  and  changed  condition  of  the  maker,  and  that  only,  by 
which  the  indorser  stands  committed,  without  a  regular  demand. 

We  are,  then,  to  inquire  whether  these  exceptions  are  to  be  multi- 
plied, and  extended  to  a  case  where  no  change  in  the  condition  of 
either  party  has  taken  place;  where  the  maker,  when  the  note  was 
made  and  indorsed,  had  a  known  residence  in  another  State,  and 
which  had  remained  unchanged  at  the  maturity  of  the  note.  It  is 
ipalpable  that  this  exception,  if  made,  must  be  placed  on  some  new 


218  indorser's  contract. 

principle;  it  cannot  be  allowed  on  the  ground  which  upholds  the 
others.  The  facts  in  this  case  are  unchanged;  and,  as  the  reason 
for  making  an  exception  does  not  exist,  the  exception  itself  should 
not  be  allowed.  Unless,  therefore,  the  general  position  is  true,  that 
one  who  indorses  for  a  maker  who  lives  in  another  State  may  be 
"  held  liable  without  any  demand  being  made  on  the  maker,"  I  think 
the  defendant  was  not  liable  in  the  case  at  bar.  And  if  any  such  gen- 
eral rule  of  law  as  I  have  stated  exists,  it  certainly  may  be  shown; 
but  that  it  has  no  existence  is,  as  I  believe,  not  only  according  to  the 
universal  understanding  amongst  commercial  men,  but  also  according 
to  the  settled  course  of  business  in  the  commercial  world. 

The  indorsement  of  a  note  is  an  order  to  the  maker  to  pay  the 
amount  to  the  indorsee  or  holder,  as  is  specified  and  agreed  in  the 
note,  and  an  engagement  by  the  indorser  that  if  the  note  is  duly 
demanded  of  the  maker  and  not  paid,  or  if  it  shall  be  found  im- 
practicable to  make  a  demand,  the  indorser  will  himself,  on  receiving 
due  notice,  pay  the  amount  to  the  indorsee  or  holder.  Now,  where 
such  an  order  is  drawn  upon  a  maker  who  resides  in  another  State, 
and  which  is  well  known  to  the  person  in  whose  favor  the  order  is 
drawn,  upon  what  principle  can  it  be  said  that  a  demand  of  the 
maker  is  unnecessary?  The  indorsee  voluntarily  consents  to  take 
such  an  order,  and  why  should  he  not  perform  the  condition  on  which 
the  ultimate  liability  of  the  indorser  depends?  I  confess  I  see  no 
reason  why  he  should  not.  Here  is  no  mistake,  or  misapprehension 
of  fact,  at  the  time  the  indorsement  is  made.  The  indorsee  knows 
where  the  maker  resides,  and  that  it  is  in  another  State.  He  knows 
that  by  law,  unless  the  intervention  of  a  State  line  makes  a  differ- 
ence, the  maker  must  be  sought  where  he  resides,  and  the  demand 
must  be  made  there.  When  the  time  for  payment  arrives,  the  maker 
is  still  at  his  former  residence;  the  facts  of  the  case  are  precisely 
as  they  were  when  the  order  was  drawn.  Why,  in  such  a  case,  should 
the  State  line  make  a  difference  in  the  construction  and  legal  effect 
of  this  contract  of  the  indorser?  It  was  fairly  entered  into  between 
the  parties ;  let  it  then  be  fairly  observed  and  performed  by  them. 

I  can  well  understand  why  such  an  order  made  by  an  indorser 
upon  the  maker  of  a  note  then  residing  within  this  State,  but  who 
removes  into  another  State  before  the  note  falls  due,  should  receive  a 
different  construction,  and  that  it  would  be  unreasonable  to  require 
the  holder  to  follow  the  maker  to  his  new  residence  in  order  to 
demand  payment.  Here,  a  new  and  unlooked-for  event  has  occurred, 
which,  like  the  absconding  of  a  maker,  or  an  inability  to  discover  his 
residence,  may  very  reasonably  be  held  to  excuse  a  demand.  In  these 
respects,  the  indorser  should  be  held  to  stand  committed  by  the  act 
of  the  maker.  But  where  the  facts,  in  reference  to  which  the  parties 
contracted,  were  fully  known  to  them,  and  are  in  no  respect  changed, 
I  am  unable  to  discover  any  principle  which  will  excuse  the  maker 


TAYLOR   V.   SXYDER.  219 

from  making  a  demand,  or  using  proper  diligence  to  make  a  demand, 
as  in  ordinary  cases.  The  intervention  of  a  State  line  has,  in  my 
opinion,  no  possible  bearing  on  the  question. 

I  admit  that  I  have  not  found  any  case  in  which  this  point  has 
been  expressly  adjudicated  as  I  have  stated  it.  It  seems,  however, 
to  have  been  taken  for  granted,  in  the  case  of  McGruder  v.  The  Bank 
of  Washington,  already  referred  to.  The  case  of  Duncan  v.  McCul- 
lough,  Adm'r,  etc.,  4  Serg.  &  Eawle,  480,  was,  in  some  of  its  features, 
much  like  the  one  at  bar.  .  .  . 

[Here  follows  a  discussion  of  this  case.  The  court  then  proceeds:] 
And  here  let  me  observe  that,  although  the  date  of  a  note  does  not 
make  it  payable  at  that  place,  still  the  date  may,  in  one  respect,  be 
very  important.  It  raises  a  presumption  that  the  maker  resides  there, 
although  it  is  only  presumption.  3  Kent,  96,  97;  Lowery  v.  Scott, 
24  Wend.  358 ;  Galpin  v.  Hard,  3  McCord,  394.  And  where  it  be- 
comes a  question  of  due  diligence  in  seeking  to  make  a  demand,  it 
may  be  all  important  to  show  that  inquiry  was  made  at  the  place 
where  the  note  bears  date.  But  here,  this  point  is  of  no  consequence, 
for  the  residence  of  the  maker  was  known  to  all  parties,  and  not  the 
least  effort  was  made  to  make  demand  of  him  where  he  lived,  or  at 
any  other  place  than  Troy,  where  the  indorser  resided,  the  maker 
then  being  at  his  home  in  Florida. 

I  am  aware  that  Judge  Story,  in  his  treatise  on  Promissory  Notes, 
after  adverting  to  various  grounds  on  which  a  demand  of  payment 
may  be  excused,  says :  "  It  seems,  also,  that  if  the  maker  of  a  prom- 
issory note  resides  and  has  his  domicile  in  one  State,  and  actually 
dates  and  makes  and  delivers  a  promissory  note  in  another  State,  it 
will  be  sufficient  for  the  holder  to  demand  pa)anent  thereof  at  the 
place  where  it  is  dated,  if  the  maker  cannot  personally,  upon  reason- 
able inquiries,  be  found  within  the  State,  and  has  no  known  place  of 
business  there."  §  236.  For  this  he  refers  to  the  case  of  Hepburn 
V.  Toledano,  10  Mart.  (La.)  643.  It  will  be  observed  that  Judge 
Story  does  not  give  to  this  position  the  authority  of  his  name  and 
character;  the  point  is  stated  doubtingly.  It  seems,  he  says,  that 
under  such  circumstances  the  maker  need  not  be  sought  in  the  State 
where  he  resides,  and  not  that  it  is  clear  this  will  excuse  the  usual 
demand.  The  learned  author  was  obviously  doing  no  more  than  to 
state  what  seemed  to  him  to  have  been  decided  in  Louisiana,  and  he 
does  it  in  a  manner  which  precludes  the  idea  that  he  intended  to 
adopt  the  principle,  or  give  to  it  any  authority  beyond  that  of  the 
elevated  and  able  tribunal  by  which  the  case  was  determined.  I  have 
looked  at  the  report  of  the  case  of  Hepburn  v.  Toledano. 

I  must  say  that  my  impression  upon  this  case  is  that  the  maker  of 
the  note  had  removed  from  Louisiana  after  the  giving  of  the  note; 
but,  if  the  fact  were  otherwise,  I  think  the  decision  should  not  be 


220  indorsee's  contract. 

followed.  The  case  is  not  strict!}^  authority,  although  harmony  in  the 
decisions  of  the  several  State  courts,  upon  such  a  point,  is  exceedingly 
desirable.  But  I  cannot  assent  to  the  principle  that  where  no  change 
has  taken  place  in  the  residence  of  the  maker,  between  the  making  of 
the  note  and  the  time  of  its  payment,  the  intervention  of  a  State  line 
dispenses  with  the  necessity  of  making  due  demand  of  payment,  or 
at  all  affects  the  question.  I  therefore  think  the  nonsuit  was  right, 
and  a  new  trial  should  be  denied. 

New  trial  denied. 


WEST   V.   BROWN. 

Supreme  Court  of  Ohio,  December,  1856.    6  Ohio  St.  542. 

A  room,  in  the  office  of  another,  being  one's  only  place  for  receiving  business  calls, 
and  being  a  place  at  which  one  gives  notice  that  word  left  there  will  find  one,  is  a 
proper  place  for  making  demand  of  payment. 

The  case  is  stated  in  the  opinion. 
[Argument  reported.] 

BowEN,  J.    The  suit  below  was  on  the  following  note : 

"  Cincinnati,  Nov.  20, 1854. 
Three  months  after  date  I  promise  to  pay  to  the  order  of  Samuel 
West  one  hundred  and  fifty  dollars,  value  received. 

(Signed)  Joseph  B.  Babcock. 
(Indorsed)  Samuel  West." 

The  note  was  discounted  by  the  defendant  and  proceeds  paid  to 
Babcock,  the  maker.  It  was  afterward  left  at  the  Union  Bank  for 
collection.  Notice  was  sent  by  the  bank  to  Babcock  some  time  before 
it  matured,  that  this  note  would  fall  due  on  the  23d  of  February, 
1855,  at  said  Union  Bank. 

Babcock  resided  in  the  eastern  part  of  the  city.  He  had  no  place 
of  business  exclusively  his  own.  He  was  allowed  to  occupy  the  office 
of  Mr.  Harding,  on  Vine  Street,  which  was  the  place  where  he  re- 
ceived business  calls  and  directed  them  to  be  made.  The  business  of 
Babcock  at  the  time  was  that  of  a  small  vender  of  pamphlets  and 
periodicals  in  the  streets  of  the  city.  He  had  told  persons  that  in- 
formation left  for  him  at  Harding's  would  find  him.  The  notary 
public  states  that  he  went  to  the  said  office  of  Babcock,  on  Vine 
Street,  between  four  and  five  o'clock  p.  m.,  on  the  23d  of  February, 
and  demanded  payment  of  the  note.  He  was  told  there  were  no  funds 
there  to  pay,  and  that  Mr.  Babcock  was  out ;  whereupon  he  protested 


WEST  V.   BROWN.  221 

the  note  for  non-payment,  and  on  the  next  day  he  put  a  notice  in  the 
post-office  for  West,  the  indorser,  directed  to  him  at  Milford,  Ohio, 
"West  received  the  notice  on  the  27th  or  28th  of  February,  postmarked 
Cincinnati,  February  26.  The  notary  says  that  he  is  confident  that 
he  mailed  the  notice  to  West  before  nine  o'clock  on  the  day  after  the 
protest,  and  that  early  business  in  Cincinnati,  at  that  season  of  the 
year,  did  not  commence  before  seven  or  eight  o'clock  in  the  morning. 
Milford  is  fifteen  miles  from  Cincinnati,  and  it  was  shown  that  the 
mail  was  closed  daily,  for  that  place,  at  five  o'clock  a.  m.,  and  that  all 
letters  put  into  the  office  after  that  hour,  for  Milford,  would  not  go 
until  the  next  mail ;  that  in  this  case  the  next  mail  day  was  Monday, 
the  26  th  of  February.  Sunday,  the  25th,  intervened,  when  there  was 
no  mail. 

West  was  an  accommodation  indorser  for  Babcock. 

The  cause  was  submitted  to  the  court  below  as  to  West,  and  a  judg- 
ment found  for  the  plaintiff,  when  the  defendant  moved  the  court  to 
grant  him  a  new  trial,  which  motion  was  refused,  and  a  bill  of  excep- 
tions was  tendered  and  allowed.  Judgment  was  taken  by  default 
against  Babcock. 

Two  points  are  relied  on  by  the  plaintiff  in  error,  to  reverse  the 
proceedings  of  the  Superior  Court.  1.  That  no  such  demand  of  pay- 
ment was  made  of  Babcock,  the  maker,  as  the  case  required.  2.  That 
there  was  no  legal  notice  of  demand  and  non-payment  served  on  West, 
the  indorser. 

First.  This  note  was  deposited  with  a  bank  for  collection,  and, 
according  to  the  usage  of  bankers  in  Cincinnati,  Babcock  was  per- 
sonally notified  of  the  place  where  and  of  the  time  when  the  paper 
would  become  due.  Although  no  place  of  payment  was  named  in 
the  note,  yet  as  the  maker  resided  in  Cincinnati,  it  was  not  unreason- 
able to  require  payment  of  it  to  be  made  at  one  of  the  banking  houses 
of  the  city.  It  was  the  manifest  duty  of  Babcock  to  have  taken  up 
the  note  at  the  Union  Bank,  in  compliance  with  the  notice  which  he 
received  for  that  purpose.  But  having  failed  to  do  that,  the  notary 
public  called  at  his  place  of  receiving  customers,  and  formally  de- 
manded payment.  It  is  said  that  the  demand  ought  to  have  been 
made  at  his  family  residence,  and  could  not  be  made  elsewhere,  as  he 
had  no  well  established  business  office.  It  seems  that  he  occupied  a 
room  at  Harding's,  where  he  directed  calls  to  be  made  and  where  he 
received  them.  By  his  own  acts  and  declarations  he  authorized  this 
place  to  be  known  as  his  office  for  transacting  business.  He  apprised 
the  public  that  he  could  be  found  there,  that  "  word  left  there  would 
find  him."  He  claimed  no  other  business  location.  He  gave  no 
directions  or  authority  for  calling  on  him,  for  business  purposes,  at 
his  residence.  His  desire  was  to  have  an  office  for  doing  business, 
where  he  might  conveniently  and  with  certainty  be  found,  and  a 
.selection  of  such  place  he  accordingly  made  at  Harding's,  where  he 


222  indorsek's  contract. 

was  sought  by  the  notary  public,  but  when  applied  for  happened  to 
be  out.  The  object  of  the  visit,  however,  was  fully  explained  to  those 
who  were  found  in  the  office.  We  are  satisfied  tfiat  reasonable  dili- 
gence in  this  case  was  used  by  the  holder  of  the  note  to  obtain  pay- 
ment from  Babcock,  and  that  the  claim  that  no  demand  of  payment 
was  made  of  him  is  not  well  founded. 

...  [On  the  second  point  it  was  held  that  the  defendant  was  duly 
notified.] 

The  judgment  of  the  Superior  Court  is 

Afjirmed. 


CHICOPEE  BANK  v.    PHILADELPHIA  BANK. 

Supreme  Court  of  the  United  States,  December,  1869.     8  Wall.  641. 

When  the  instrument  is  payable  at  a  bank,  there  is  an  equivalent  of  presentment ; 
in  such  a  case,  the  presence  of  the  instrument  in  the  bank,  at  maturity,  to  the  knowledge 
of  the  bank,  is  sufficient. ^ 

Action  of  negligence  to  recover  the  amount  of  a  bill  of  exchange, 
brought  by  the  National  Bank  of  Philadelphia  against  the  Chicopee 
Bank  of  Springfield,  Mass.  The  plaintiff  bank  alleged  that,  through 
the  negligence  of  the  defendant  bank,  it  had  lost  its  right  to  have 
recourse  against  the  drawer  and  indorser  to  recover  the  amount  of 
the  bill. 

The  bill  had  been  accepted  by  the  drawee,  payable  at  the  Chicopee 
Bank,  and  was  due  Saturday,  February  19,  1865.  On  February  13 
the  holder  of  the  bill  indorsed  it  to  the  Philadelphia  Bank,  which,  on 
that  day,  forwarded  it,  by  mail,  to  the  defendant  bank.  The  letter 
containing  the  bill  was  delivered  at  the  bank,  but  did  not  come  into 
the  hands  of  the  cashier,  because  it  had  slipped  through  a  crack  in  the 
table  on  which  the  mail  had  been  placed,  and  it  did  not  appear  that 
the  presence  of  the  letter  in  the  bank  was  known  to  any  of  the  bank 
officials. 

On  Monday,  the  20th,  the  cashier  of  the  plaintiff  bank  telegraphed 
inquiring  if  the  bill  had  arrived,  and  on  the  same  day  received  a  tele- 
gram from  the  defendant's  cashier,  saying,  "  Not  yet  received  " ;  he 
communicated  this  fact  to  the  indorser,  but  took  no  other  steps. 

The  acceptor  did  not  call  at  the  Chicopee  Bank  on  the  day  of 
maturity  to  pay  the  bill. 

The  court  instructed  the  jury  that  to  constitute  a  valid  present- 
ment and  demand,  the  bill  in  such  a  case  as  this  must  be  in  the  bank, 
ready  to  he  delivered  to  the  acceptor  on  the  day  of  maturity;  that  on 
the  facts  in  the  case  there  had  been  no  presentment  and  demand; 

1  Cf.  N.  I.  L.  §§  87,  92. 


CHICOPEE   BANK  V.   PHILADELPHIA  BANK.  223 

and  that  if  the  fact  that  the  bill  was  not  ready  to  be  delivered  to  the 
acceptor,  was  due  to  the  negligence  of  the  defendant,  the  plaintiff 
could  recover. 

Verdict  for  the  plaintiff.    Writ  of  error. 

[Argument  reported.] 

Nelson,  J.  The  case  was  put  to  the  jury,  whether  or  not  the  loss 
of  the  bill,  and  consequent  inability  of  the  collection  bank  to  take 
the  proper  steps  against  the  acceptors  to  charge  the  prior  parties,  was 
attributable  to  negligence,  and  want  of  care  on  the  part  of  the  Chic- 
opee  Bank,  and  that,  if  it  was,  the  bank  was  responsible.  The  jury 
found  for  the  plaintiffs. 

In  cases  where  the  drawee  accepts  the  bill,  generally,  in  order  to 
charge  the  drawer  or  indorser,  the  holder  must  present  the  paper, 
when  due,  at  his  place  of  business,  if  he  has  one,  if  not,  at  his  dwell- 
ing or  residence,  and  demand  payment;  and,  if  the  money  is  not 
paid,  give  due  notice  to  the  prior  parties.  If  he  accepts  the  bill,  pay- 
able at  a  particular  place,  it  must  be  presented  at  that  place,  and 
payment  demanded.  In  these  instances,  as  a  general  rule,  the  bill 
must  be  present  when  the  demand  is  made,  as  in  case  of  payment  the 
acceptor  is  entitled  to  it  as  his  voucher.  When  the  bill  is  made  pay- 
able at  a  bank,  it  has  been  held  that  the  presence  of  the  bill  in  the 
bank  at  maturity,  with  the  fact  that  the  acceptor  had  no  funds  there, 
or,  if  he  had,  were  not  to  be  applied  to  payment  of  the  paper,  consti- 
tute a  sufficient  presentment  and  demand ;  and,  if  the  bill  is  the  prop- 
erty of  the  bank,  the  presence  of  the  paper  there  need  not  be  proved, 
as  the  presumption  of  law  is,  that  the  paper  was  in  the  bank,  and  the 
burden  rests  upon  the  defendant  to  show  that  the  acceptor  called  to 
pay  it. 

In  the  present  case  it  is  argued  that  the  bill  was  in  the  Chicopee 
Bank  at  the  time  of  its  maturity,  and,  as  the  acceptors  had  no  funds 
there,  a  sufficient  presentment  and  demand  were  made,  according  to 
the  law  merchant.  It  is  true  the  bill  was  there  physically,  but,  within 
the  sense  of  this  law,  it  was  no  more  present  at  the  bank  than  if  it 
had  been  lost  in  the  street  by  the  messenger  on  his  way  from  the  post- 
office  to  the  bank,  and  had  remained  there  at  maturity ;  and  this  loss, 
which  occasioned  the  failure  to  take  the  proper  steps,  or,  rather,  in 
the  present  case,  to  furnish  the  holder  with  the  proper  evidence  of 
the  dishonor  of  the  paper,  so  as  to  charge  the  prior  parties,  and  enable 
him  to  have  recourse  against  them,  is  wholly  attributable,  according 
to  the  verdict  of  the  jury,  to  the  collecting  bank.  In  the  eye  of  the 
law  merchant  there  was  no  presentment  or  demand  against  the  ac- 
ceptors ;  and,  as  a  consequence  of  this  default,  the  holder  has  lost  his 
remedy  against  the  drawer  and  indorser,  which  entitles  him  to  one 
against  the  defendant.     The  radical  vice  in  the  defence  being  the 


224  indorsee's  contract. 

failure  to  prove  a  presentment  and  demand  upon  the  acceptors  at  the 
maturity  of  the  bill,  the  question  of  notice  is  unimportant. 

But,  if  it  had  been  otherwise,  the  notice  itself  was  utterly  defective. 
That  relied  on  is  the  answer  of  the  defendant  to  the  telegram  of  the 
plaintiff  of  the  20th  February,  which  was  that  the  bill  had  not  yet 
been  received.  This  was  after  its  maturity,  and  it  simply  advised  the 
holder  and  payee  indorser,  to  whom  the  information  was  communi- 
cated the  same  day,  that  the  drawer  and  indorser  were  discharged 
from  any  liability  on  the  paper.  It  showed  that  the  proper  steps 
had  not  been  taken  against  the  acceptors  to  charge  them. 

Some  criticism  is  made  upon  the  refusal  of  the  court  below  to 
charge,  as  to  which  side  the  burden  of  proof  belonged,  in  respect  to 
the  question  of  negligence  and  want  of  care,  after  the  paper  came 
into  the  hands  of  the  defendant.  No  objection  is  taken  to  the  charge 
itself,  upon  this  question,  and,  indeed,  could  not  have  been,  as  the 
point  was  submitted  to  the  jury  as  favorably  to  the  defendants  as 
could  have  been  asked.  We  think  the  court,  after  having  submitted 
fairly  the  evidence  on  both  sides  bearing  upon  the  question,  had  a 
right,  in  the  exercise  of  its  discretion,  to  refuse  the  request. 

If,  however,  the  court  had  inclined  to  go  further,  and  charge  as  to 
the  burden  of  proof,  it  should  have  been  that  it  belonged  to  the  de- 
fendant. The  loss  of  the  bill  by  the  bank  carried  with  it  the  pre- 
sumption of  negligence,  and  want  of  care;  and,  if  it  was  capable  of 
explanation,  so  as  to  rebut  this  presumption,  the  facts  and  circum- 
stances were  peculiarly  in  the  possession  of  its  officers,  and  the 
defendant  was  bound  to  furnish  it.  Where  a  peculiar  obligation  is 
cast  upon  a  person  to  take  care  of  goods  intrusted  to  his  charge,  if 
they  are  lost  or  damaged  while  in  his  custody,  the  presumption  is 
that  the  loss  or  damage  was  occasioned  by  his  negligence,  or  want  of 
care  of  himself  or  of  his  servants.  This  presumption  arises  with 
respect  to  goods  lost  or  injured,  which  have  been  deposited  in  a 
public  inn,  or  which  had  been  intrusted  to  a  common  carrier.  But 
the  presumption  may  be  rebutted.  Dawson  v.  Chamney,  5  Q.  B. 
164;  Coggs  V.  Bernard,  2  Ld.  Eaym.  918;  Day  v.  Riddle,  16  Vt.  48. 

Judgment  affirmed. 


GEAND  BANK  v.   BLANCHAED. 

Supreme  Court  of  Massachusetts,  November,  1839.     23  Pickering,  305. 

There  may  be  another  equivalent  of  presentment,  as  where,  by  castom  in  the  locality, 
an  instrument  payable  generally  is  lodged  in  a  bank  for  collection,  and  the  bank 
notifies  the  maker,  drawee,  or  acceptor  of  the  fact,  and  requests  payment. 

By  an  agreed  statement  of  facts  it  appeared  that  this  was  an  action 
by  a  bank  established  in  the  town  of  Marblehead,  against  the  defend- 
ant, a  resident  in  that  town,  as  indorser  of  a  promissory  note; 


GRAND   BANK  V.  BLANCHARD.  225 

that  the  plaintiffs  demanded  payment  of  the  makers,  according 
to  the  usual  course  of  business  of  the  bank,  by  a  notice  informing 
them  that  the  note  was  due,  and  that  it  was  at  the  bank  for  payment ; 
that  the  note  not  having  been  paid,  the  cashier,  on  the  afternoon 
of  the  last  day  of  grace,  wrote  a  notice  of  such  non-payment,  ad- 
dressed to  the  defendant,  and  gave  the  same  to  the  messenger  of  the 
bank  to  be  delivered  to  the  defendant;  that  the  messenger  did  not 
deliver  it  to  the  defendant  until  between  eight  and  nine  o'clock  of 
the  next  morning,  before  the  usual  time  of  opening  the  bank  for 
business;  and  that  the  makers  of  the  note  became  insolvent  several 
months  before  it  was  payable. 

It  was  the  usual  course  of  business  at  the  bank,  to  deliver  notices 
of  non-payment  to  indorsers,  on  the  last  day  of  grace,  immediately 
after  the  bank  was  closed. 

If  the  notice  given  to  the  defendant  was  sufficient,  he  was  to  be 
defaulted ;  otherwise,  the  plaintiffs  were  to  become  nonsuit. 

[Argument  not  reported.] 

Shaw,  C.  J.  A  question  was  made  by  the  counsel  for  the  defend- 
ant, whether  the  defendant  could  be  liable  as  indorser,  without  an 
actual  presentment  to  the  makers,  and  a  refusal  by  them,  it  not 
appearing  affirmatively,  that  the  defendant  was  conusant  of  the  bank 
usage  respecting  the  mode  of  demand.  This  point  was  afterwards 
waived,  and  is  not  material  in  the  present  case.  But  the  custom  of 
the  banks  of  Massachusetts,  of  sending  a  notice  to  the  maker  of  a 
note  to  come  to  the  bank  and  pay  it,  and  treating  his  neglect  to  do 
so  during  bank  hours,  on  the  last  day  of  grace,  as  a  dishonor,  and 
all  parties  acquiescing  in,  and  consenting  to,  such  neglect  as  a  dis- 
honor, has  become  so  universal  and  continued  so  long,  that  it  may 
well  be  doubted,  whether  it  ought  not  now  to  be  treated  as  one  of 
those  customs  of  merchants,  of  which  the  law  will  take  notice,  so 
that  every  man,  who  is  sufficiently  a  man  of  business  to  indorse  a 
note,  may  be  presumed  to  be  acquainted  with  it,  and  assent  to  it, 
at  least  until  the  contrary  is  expressly  shown.  It  is  to  be  recollected, 
that  the  rules  respecting  presentment,  demand,  and  dishonor  of 
bills  of  exchange  and  promissory  notes,  and  indeed  the  lex  mer- 
catoria  generally,  originated  in  the  custom  of  merchants,  which 
custom  was  a  matter  of  fact  to  be  proved  by  the  party  relying  on  it, 
and  to  be  determined  by  the  jury.  But  when  a  custom  has  been 
definitely  settled  by  judicial  decisions,  it  is  taken  notice  of  by  courts 
as  part  of  the  law  of  the  land,  and  need  not  be  proved  as  a  fact 
in  each  case.  1  Bl.  Comm,  75 ;  Edie  v.  East  Ind.  Co.,  2  Burr.  1226. 
But  the  point  being  waived,  it  is  not  necessary  to  say  whether  the 
plaintiff  must  have  failed  for  want  of  a  statement  of  that  usage  in 
the  facts  agreed. 

15 


226  indorsee's  contract. 

It  is  conceded  in  the  case,  that  the  presentment  of  the  note  to 
the  maker,  his  neglect  to  pay  it  during  bank  hours,  on  the  last  day 
of  grace,  conformably  to  the  usage  of  the  bank,  constituted  the  dis- 
honor of  the  note.  But  the  defendant  insists,  that  the  notice  to  him 
was  not  seasonable,  because  the  bank  have  been  accustomed  to  send 
notice  to  indorsers,  on  the  afternoon  of  the  last  day  of  grace,  soon 
after  the  bank  closes;  and,  therefore,  they  did  not  in  this  case 
conform  to  their  own  usage,  the  notice  not  being  sent  till  next  morn- 
ing; and  the  defendant  relies  on  the  authority  of  Boston  Bank  v. 
Hodges,  9  Pick.  420.  The  settled  general  rule  of  the  mercantile 
law  is,  that  notice  to  the  indorser  on  the  day  of  the  dishonor  and 
after  it,  or  in  the  course  of  the  next  succeeding  day,  is  seasonable. 
All  that  is  peculiar  in  the  custom  and  usage  of  banks,  in  this  State, 
affects  the  mode  of  presentment.  The  presentment  to  the  promisor, 
and  the  giving  of  notice  to  the  indorser,  are  distinct  acts.  The 
presentment  being  good  according  to  custom,  and  the  note  remaining 
unpaid  in  the  bank,  it  was  dishonored ;  ^  then  the  only  remaining 
question  was,  whether  the  defendant  had  seasonable  notice.  If  the 
bank  had  the  afternoon  of  the  day  of  dishonor,  and  the  whole  of  the 
next  day,  to  give  notice,  we  do  not  think  that  their  right  is  restrained 
by  the  fact,  that  they  have  usually  done  their  duty  promptly  at 
the  earliest  time.  It  is  to  be  presumed,  that  banks,  acting  upon  im- 
portant interests,  in  pursuance  of  general  rules,  by  officers,  to  whom 
particular  duties  are  specially  assigned,  would  give  their  notices  at 
their  earliest  time  after  the  dishonor ;  but  that  does  not  restrain  their 
liberty  allowed  by  law  and  by  general  mercantile  usage,  when  they 
have  occasion  to  use  it. 

The  case  differs  entirely  from  Boston  Bank  v.  Hodges.  There  the 
note  was  not  dishonored  when  the  indorser  had  notice,  nor  even  when 
the  suit  was  brought;  not  by  presentment  to  the  makers,  for  none 
had  been  made;  nor  by  a  notice  to  the  maker  to  come  to  the  bank 
and  pay  it,  during  the  banking  hours  of  the  last  day  of  grace,  and 
his  -failure  to  do  so,  because  it  was  sued  before  the  commencement  of 
those  banking  hours.  The  cause  was  decided  upon  the  ground,  that 
there  had  been  no  legal  demand  upon  the  maker,  either  according 
to  the  general  rule  of  law,  or  according  to  their  usage;  but  the 
principles  of  the  decision,  we  think,  do  not  touch  the  present  case. 

Judgment  for  the  plaintiffs. 

1  Cf.  West  V.  Brown,  6  Ohio  St.  542,  ante,  p.  220. 


MONTELIUS   V.   CHARLES.  227 

MONTELIUS    V.    CHAELES. 

Supreme  Court  of  Illinois,  January,  1875.     76  111.  303. 

A  bill  of  exchange  not  payable  at  a  fixed  date,  must  be  presented  to  the  drawee 
within  a  reasonable  time  after  the  last  negotiation  thereof.^ 

Appeal  from  a  judgment  in  favor  of  the  plaintiffs.  The  case 
is  stated  in  the  opinion. 

[Argument  not  reported.] 

Scott,  J.  This  action  was  upon  an  inland  bill  of  exchange,  in 
the  name  of  a  remote  assignee,  against  the  drawers.  One  important 
question  is,  whether  the  holders  had  been  guilty  of  such  laches, 
before  presenting  it  to  the  drawee  for  payment,  as  would  bar  a  re- 
covery against  the  drawers. 

Defendants  were  engaged  in  the  banking  business  at  Piper  City 
in  this  State.  On  the  8th  of  September,  1873,  on  the  application 
of  James  McBride,  they  drew  their  draft  on  the  Franklin  Bank  of 
Chicago,  payable  at  sight,  to  the  order  of  John  Strank,  who  then 
resided  at  Canton  in  Dakota.  It  was,  on  the  same  day,  deposited 
in  the  post-office,  directed  to  the  payee  at  Canton,  who  received  it 
after  some  delay  attributable  alone  to  the  fault  of  the  mails.  Hav- 
ing passed  through  the  hands  of  several  holders,  it  was  presented 
on  the  13th  day  of  October,  1873,  to  the  bank  for  payment,  which 
being  refused,  it  was  protested,  and  notice  given  through  the  post- 
office  to  the  drawers  and  the  several  indorsers.  In  the  meantime 
the  Franklin  Bank,  on  which  the  draft  had  been  drawn,  had  failed 
and  gone  into  bankruptcy. 

The  law  is  settled  by  an  unbroken  line  of  decisions  that  all  drafts,^ 
whether  foreign  or  inland  bills,  must  be  presented  to  the  drawee 
within  a  reasonable  time,  and  in  case  of  non-payment  notice  must 
be  given  promptly  to  the  drawer  to  charge  him.  But  what  is  a 
reasonable  time,  under  all  the  circumstances,  is  sometimes  a  most 
difficult  question.  The  general  doctrine  is,  each  case  must  depend 
on  its  own  peculiar  facts  and  be  judged  accordingly. 

In  Strong  v.  King,  35  111.  9,  it  was  declared  to  be  a  general  rule, 
that  the  holder  of  a  sight  draft  must  put  it  in  circulation,  or  present 
it  for  payment  at  furthest  on  the  next  business  day  after  its  reception, 
if  within  the  reach  of  the  person  on  whom  it  is  drawn.  In  the  case 
at  bar  the  draft  was  put  in  circulation,  and  the  point  is  made,  that 
the  mere  fact  it  was  not  presented  for  payment  until  after  the  lapse 
of  thirty-five  days  is  per  se  such  laches  on  the  part  of  the  holders 
as  would  discharge  the  drawers. 

1  SeeN.  I.  L.  §§  88,  161. 

2  The  court  apparently  had  in  mind  the  case  of  sight  bills,  which  was  the  case  under 
discussion.     See  N.  I.  L.  §  160. 


228  indorser's  contract. 

In  Muilman  v.  D'Eguino,  2  H.  Black.  565,  Eyre,  C.  J.,  said: 
*'  Courts  have  been  very  cautious  in  fixing  any  time  for  an  inland 
bill  payable  at  a  certain  period  after  sight  to  be  presented  for  accept- 
ance, and  it  seems  to  me  more  necessary  to  be  cautious  with  respect 
to  foreign  bills  payable  in  that  manner.^  If,  instead  of  drawing 
their  foreign  bills  payable  at  usances  in  the  old  way,  merchants 
choose,  for  their  own  convenience,  to  draw  them  in  this  manner 
and  make  the  time  commence  when  the  holder  pleases,  I  do  not 
see  how  the  courts  can  lay  down  any  precise  rule  on  the  subject. 
I  think,  indeed,  the  holder  is  bound  to  present  the  bill  in  a  reason- 
able time,  in  order  that  the  period  may  commence  from  which  the 
pajTnent  is  to  take  place.  The  question  what  is  a  reasonable  time 
must  depend  on  the  peculiar  circumstances  of  the  case,  and  it 
must  always  be  for  the  jury  to  determine  whether  laches  is  imput- 
able to  the  plaintiff."  Buller,  J. :  "  Due  diligence  is  the  only 
thing  to  be  looked  at,  whether  the  bill  be  a  foreign  or  an  inland 
one,  and  whether  it  be  payable  at  sight,  at  so  many  days  after,  or 
in  any  other  manner.  But  here  I  must  observe  that  I  think  a  rule 
may  thus  far  be  laid  down  with  regard  to  all  bills  payable  at  sight, 
or  at  a  certain  time  after  sight,  namely,  that  they  ought  to  be  put 
into  circulation.  If  they  are  circulated,  the  parties  are  known  to  the 
world  and  their  credit  is  looked  to;  and  if  a  bill,  drawn  at  three 
days'  sight,  were  kept  out  in  that  way  for  a  year,  I  cannot  say  that 
there  would  be  laches.  But  if,  instead  of  putting  it  in  circulation, 
the  holder  were  to  lock  it  up  for  any  length  of  time,  I  should  say  he 
was  guilty  of  laches." 

Bills,  both  inland  and  foreign,  having  the  quality  of  negotia- 
bility, are  intended  in  some  degree  to  be  used  as  a  part  of  the  circula- 
tion of  the  country,  and  are  indispensable  in  the  conduct  of  extended 
commercial  transactions.  They  afford  a  safe  and  convenient  mode 
of  making  payments  of  indebtedness  between  distant  points.  Bank- 
ing houses  that  for  a  consideration  issue  such  bills  must  be  under- 
stood to  do  so  in  accordance  with  the  known  custom  of  the  country, 
—  that  they  will  be  put  in  circulation  for  a  limited  period.  If  this 
were  not  so,  their  value  would  be  greatly  depreciated,  and  their 
utility  in  commercial  transactions  would  be  destroyed.  Were  it 
understood  the  purchaser  of  such  a  bill  was  bound  to  make  all  possible 
despatch  to  present  it  to  the  drawee  or  lose  his  recourse  on  the 
drawer,  no  prudent  man  would  feel  safe  in  taking  one.  He  may 
know  the  drawer  from  whom  he  purchases  the  bill  and  be  willing 

^  The  bill  in  that  case  was  a  foreign  hill,  drawn  in  five  sets,  March  5,  1793,  in 
London,  on  Calcutta ;  the  sets  were  sent  to  India  in  May  following  and  reached  there 
October  3  of  that  year.  Four  of  the  sets  were  protested  for  non-acceptance  on  the 
29th  of  the  same  month,  and  the  fifth  on  the  18th  of  the  next  month.  'Ihe  causes  of 
delay  are  stated  in  the  report  of  the  case.  The  jury  found  that  there  hud  been  no 
laches,  and  the  verdict  was  upheld. 


MONTELIUS   V.   CHARLES.  229 

to  rely  on  his  responsibility;  but  in  many  cases  he  has  and  can 
have  no  knowledge  of  the  drawer's  correspondent,  the  drawee.  Com- 
mercial usage  has  therefore  placed  the  responsibility  upon  the  drawer, 
and  he  is  presumed,  in  consideration  of  the  premium  paid,  to  as- 
sume all  risks  as  to  the  solvency  of  the  drawee  for  such  reasonable 
time  as  the  bill  shall  be  kept  in  circulation.  There  can  be  no  doubt, 
if  the  holder  locks  it  up  and  keeps  it  out  of  circulation,  he  assumes 
all  risks,  and  in  case  the  bill  is  dishonored  his  laches  in  that  regard 
would  bar  a  recovery  against  the  drawer.  Such  bills  are  not  issued 
with  a  view  to  be  held  as  a  permanent  security,  with  a  continuing 
liability  in  the  drawer.  Illustrative  of  the  law  of  this  branch  of 
the  case  is  Shute  v.  Eobbins,  3  Car.  &  P.  80. 

The  difficulty  is,  to  determine  for  what  length  of  time  such  a 
bill  may  be  kept  in  circulation  consistently  with  a  continuing 
liability  in  the  drawer.  The  rule  adopted,  as  we  have  seen,  is,  it 
must  be  presented  in  a  reasonable  time  under  all  the  circumstances. 
But  courts  not  infrequently  experience  great  perplexity  in  making 
a  distinction  between  a  reasonable  time  for  the  presentation  of 
such  paper  and  laches  on  the  part  of  the  holder.  Every  case  differs 
so  essentially  in  its  facts,  it  has  given  rise  to  many  apparently  con- 
tradictory decisions;  but  through  all  of  them  is  noticeable  the 
effort  of  the  courts  to  ascertain  whether  the  bill  was  kept  in  cir- 
culation for  only  a  reasonable  period  in  the  regular  course  of  busi- 
ness. When  that  fact  is  once  established,  the  liability  of  the  drawer 
is  regarded  as  continuing.  It  will  be  found  the  decisions  differ 
only  in  what  the  various  courts  deemed  reasonable  in  each  particular 
case. 

In  Robinson  v.  Ames,  20  Johns.  147,  the  bill  declared  on  was 
drawn  on  the  6th  of  March,  but  not  presented  for  payment  to  the 
drawees  until  the  20th  of  May.  In  the  meantime  the  drawees  had 
failed;  but  in  a  well-reasoned  opinion  the  court  came  to  the  con- 
clusion there  was  no  such  laches  as  would  discharge  the  drawer.  In 
Jordan  v.  Wheeler,  20  Tex.  698,  the  bill  in  suit  was  put  in  circulation 
and  indorsed  by  defendants  without  having  been  presented  for 
acceptance  before  it  came  to  the  hands  of  the  plaintiff.  A  little 
more  than  a  month  elapsed  before  he  presented  it  for  payment,  and 
that  was  declared  to  be  according  to  usage.  In  Nichols  v.  Black- 
more,  27  Tex.  586,  the  court  was  of  opinion  a  delay  of  forty-seven 
or  forty-eight  days  was  not  such  laches  as  would  forfeit  the  right 
of  the  holder  to  recourse  against  the  drawer,  in  default  of  payment 
by  the  drawee. 

Many  other  cases  of  the  same  import  might  be  cited,  but  these  are 
sufficient  for  our  present  purpose.  They  establish,  beyond  doubt, 
the  fact  that  there  is  no  fixed  period  in  which  the  bill  must  be 
presented  for  payment,  but  that  each  case  must  be  decided  on  its  own 
peculiar  facts  in  the  light  of  commercial  usage. 


230  indorsee's  contract. 

In  the  case  at  bar  the  bill  was  immediately  put  in  circulation. 
It  was  mailed  to  the  payee  on  the  day  it  bore  date,  to  his  proper 
address  in  Dakota.  Some  delay  occurred,  attributable  to  interrup- 
tion in  the  transmission  of  the  mails,  but  this  fact  could  not  be 
imputed  to  the  payee  as  laches.  On  the  receipt  the  payee  immedi- 
ately undertook  and  availed  of  the  first  opportunity  to  negotiate 
the  bill.  It  was  kept  in  circulation,  and  no  delay  was  suffered  other 
than  that  incident  to  the  transaction  of  business  in  a  sparsely  popu- 
lated territory  like  Dakota.  The  facts  and  circumstances  proven 
show  no  laches  on  the  part  of  any  holder  that  would  operate  to  dis- 
charge the  drawers. 

•  •••••••• 

Judgment  affirmed. 


NATIONAL    STATE   BANK   v.   WEIL. 

Supreme  Court  of  Pennsylvania,  April,  1891.     21  Atl.  Rep.  661 ;   141  Penn. 

State,  457. 

A  cheqae  should  be  presented  within  a  reasonable  time.i  which,  by  custom,  in  the 
absence  of  special  circumstances  causing  delay,  is  on  the  day  of  issue  or  the  day  suc- 
ceeding, to  charge  the  drawer,  unless  the  latter  suffer  no  loss  by  delay ;  ^  to  charge  an 
indorser,  it  must  be  presented  on  the  day  of  transfer  or  the  day  succeeding. 

Assumpsit  by  the  indorsee  against  the  drawer  of  a  cheque.  The 
cheque  was  drawn  by  Weil  upon  the  Shackamaxon  Bank,  on  May 
26,  1885,  and  was  payable  to  Doughten,  Wilkins  &  Co.,  by  whom  it 
was  indorsed  to  the  plaintiff.  The  cheque  was  not  presented  to  the 
drawee  bank  until  the  29th  of  May;  but  the  Shackamaxon  Bank 
had  suspended  payment  before  the  presentment.  The  defendant 
filed  an  affidavit  of  defence,  in  which  he  set  up  the  foregoing  facts, 
and  further  that,  from  the  time  of  the  delivery  of  the  cheque  by  him 
to  the  payees  until  the  failure  of  the  bank,  he  had  sufficient  funds 
on  deposit  to  meet  the  cheque,  if  it  had  been  presented. 

A  rule  to  show  cause  why  judgment  should  not  be  entered  for 
the  plaintiff,  was  obtained  and  the  judgment  of  the  lower  court, 
discharging  the  rule,  delivered  by 

BiDDLE,  J.  The  cheque  upon  which  suit  is  brought  in  this  case 
was  drawn  on  the  twenty-sixth  day  of  May,  1885,  by  A.  Weil,  the 
defendant,  residing  in  the  city  of  Philadelphia,  in  favor  of  Doughten, 
Wilkins  &  Co.,  a  mercantile  house  in  the  same  city,  upon  the  Shacka- 
maxon Bank  in  said  city.  The  cheque  was  not  presented  for  payment 
to  that  bank  until  the  twenty-ninth  day  of  May,  after  it  had  sus- 
pended payment.  It  is  contended  by  the  defendant  that,  inasmuch 
as  there  were  ample  funds  in  the  bank  to  his  credit  when  it  failed, 

1  N.  I.  L.  §§  203,  209.  a  But  of.  N.  I.  L.  §§  202,  88. 


NATIONAL   STATE   BANK   V.   WEIL.  231 

and  that  if  the  said  cheque  had  been  dul)^  presented  to  the  said  bank 
at  any  time  prior  to  the  said  twenty-ninth  day  of  May,  1885,  it  would 
have  been  paid,  the  loss  was  caused  by  the  unreasonable  delay  in 
its  presentation,  and  therefore  the  drawer  was  not  liable  upon  it. 
The  question,  therefore,  is  whether  the  delay  in  its  presentation 
was  unreasonable. 

When  the  facts  and  circumstances  are  ascertained,  the  reasonable- 
ness of  time,  said  Chancellor  Kent,  vol.  3,  p.  91,  is  a  matter  of  law, 
and  every  case  will  depend  upon  its  special  circumstances.  This 
rule  has  also  been  recognized  by  our  Supreme  Court.  In  the  case  of 
National  Xewark  Banking  Co.  v.  National  Bank  of  Erie,  63  Pa.  404, 
a  travelling  collector,  after  reaching  Erie,  purchased  a  draft  on 
New  York.  The  bill  was  purchased  on  the  seventeenth  day  of 
March,  and  not  presented  until  the  twenty-eighth.  The  court  says: 
"  The  bill  was  dra-wTi  at  Erie,  in  the  State  of  Pennsylvania  at  the 
extreme  western  end  of  it,  upon  persons  in  the  city  of  New  York, 
and  sold  to  a  travelling  agent  whose  residence  was  in  Newark  in  the 
State  of  New  Jersey.  As  all  bank-notes  in  the  present  day  are  at 
par  everywhere,  the  object  in  purchasing  a  draft  was  to  prevent 
loss  by  theft,  robbery,  or  accident.  The  business  of  the  agent  led  him 
through  the  different  places  we  have  stated,  and  detained  him  neces- 
sarily on  the  road,  and  he  was  therefore  not  obliged,  nor  could  it 
be  expected,  while  so  doing,  that  he  would  transmit  the  draft  for 
collection  to  New  York;  nor  would  there  be  in  fact  any  opportunity 
to  negotiate  it  until  he  reached  his  own  home  in  New  Jersey."  And 
again  in  Muncy  Bor.  Sch.  D.  v.  Commonwealth,  84  Pa.  464,  Justice 
Paxson  in  giving  the  opinion  of  the  Supreme  Court,  says :  " '  WTiat 
is  reasonable  time  will  depend  upon  circumstances,  and  in  many  cases, 
upon  the  time,  the  mode,  and  the  place  of  receiving  the  cheque, 
and  upon  the  relations  of  the  parties  between  whom  the  question 
arises.'  ...  In  the  present  case  the  draft  was  drawn  on  the  tenth 
and  presented  on  the  twentieth.  It  did  not  come  into  the  hands  of 
the  defendants  until  the  thirteenth.  It  was  payable  to  the  order  of 
the  '  School  Board  of  Muncy.'  It  must  have  been  known  to  the 
drawers  and  the  plaintiffs  that  such  a  draft  was  liable  to  be  delayed. 
The  fact  that  it  required  the  indorsement  of  a  board  of  school  direc- 
tors, which  had  to  be  convened  and  then  take  action  upon  the  draft, 
was  suggestive  of  delay.  Then  there  was  further  delay  between 
Muncy  and  Watsontown  by  reason  of  the  mails.  This  is  ground  of 
excuse  as  we  have  seen.  In  point  of  fact  the  draft  did  not  reach 
Watsontown  until  the  evening  of  the  day  upon  which  the  drawees 
failed." 

As  the  circumstances  of  these  cases  do  not  in  any  respect  cor- 
respond with  those  of  the  case  under  consideration,  they  are  only 
valuable  as  establishing  the  principle  that  a  reasonable  time  will 
depend  upon  circumstances,  and  upon  the  time,  mode,  and  place  of 


232  indorser's  contract. 

receiving  the  cheque,  and  upon  the  relations  of  the  parties  between 
whom  the  question  arises. 

The  cheque  here  in  question  was  drawn  by  a  commercial  firm,  in 
a  commercial  city,  upon  a  city  bank,  in  favor  of  another  commercial 
firm,  and  is  therefore  strictly  a  mercantile  transaction,  not  compli- 
cated by  other  considerations.  There  is  no  question  of  necessary 
delav  in  transmission,  nor  is  any  reason  suggested  why  it  could 
not  have  been  presented  at  once.  ...  If  presented  on  the  day  of  its 
receipt  by  the  payee,  it  would  have  been  paid;  if  deposited  by 
him  in  a  city  bank  on  the  day  of  its  receipt,  it  would  have  been 
presented  on  the  next  day  and  paid.  If  deposited  the  day  after  its 
receipt,  the  twenty-seventh,  for  collection,  it  would  have  been  pre- 
sented on  the  twenty-eighth,  and  would  then  have  been  paid. 

The  rule  in  cases  of  this  character  is  that,  where  the  parties  all 
reside  in  the  same  place,  the  holder  should  present  the  cheque  on 
the  day  it  is  received,  or  the  following  day;  and  when  payable  at  a 
different  place  from  that  in  which  it  is  negotiated,  the  cheque  should 
be  forwarded  by  mail  on  the  same  or  the  next  succeeding  day  for 
presentment.  The  liability  of  the  drawer  cannot,  it  is  apprehended, 
be  enlarged  by  circulating  the  cheque ;  and  therefore,  to  charge  him 
if  the  banker  failed,  the  cheque,  in  whose  hands  soever,  must  be 
presented  within  the  period  within  which  the  payee  or  first  holder 
must  have  presented  it;  but  as  against  the  party  transferring  the 
cheque  to  the  holder,  it  is  sufficient,  whatever  the  date  of  the  cheque, 
to  present  it  or  forward  it  for  presentment  on  the  day  next  after  its 
transfer.  Byles  on  Bills,  35-39;  Hay  v.  Colbum,  1  Eob.  345; 
Gough  V.  States,  13  Wend.  549 ;  Moule  v.  Brown,  4  Bing.  N.  C.  366 
(33  E.  C.  L.  R.).  The  reason  for  this  strictness  is  said  to  be  that 
a  cheque,  unlike  a  bill  of  exchange,  is  generally  intended  for  immedi- 
ate payment  and  not  for  circulation;  and  therefore,  it  becomes  the 
duty  of  the  holder  to  present  it  for  payment  as  soon  as  he  reasonably 
may;  he  keeps  it  at  his  own  peril,  as  negotiability  is  not  of  its 
essence,  but  at  most  merely  an  optional  quality.  Story  on  Prom. 
Notes,  670-688;    Down  v.  Hailing,  4  B.  &  C.  333. 

The  rule,  therefore,  is  well  established  in  the  two  greatest  commer- 
cial cities  of  the  world,  that  a  cheque  on  a  bank  where  all  the  parties 
are  residents  of  the  same  city,  must  be  presented  on  the  day  upon 
which  it  bears  date,  or  on  the  next  day,  and  if  not,  the  risk  of  the 
solvency  of  the  drawee  is  upon  the  payee.  "We  think  that  rule  should 
be  applied  to  this  case,  there  being  no  circumstance  to  except  it 
from  its  operation,  and  that  the  delay  in  the  presentation  of  the 
cheque  was  "  unreasonable."  The  defendant  is  therefore  not  respon- 
sible for  its  non-payment. 

The  rule  for  judgment  is  discharged.    The  plaintiff  appealed. 
\ 

[Argument  not  reported.] 


MERRITT   V.   JACKSON.  233 

Per  Curiam.  "We  need  not  add  to  what  the  learned  judge  below 
has  so  well  said.  He  has  fully  covered  the  case,  and  we  afl&rm  the 
order  for  the  reasons  given  by  him. 

Order  affirmed. 


MERRITT    V.    JACKSON". 

Supreme  Court  of  Massachusetts,  March,  1902.     181  Mass.  69 ;  62  N.  E. 

Rep.  987. 

So,  to  charge  an  indorser  on  a  note  payable  on  demand,  presentment  must  be 
made  within  a  reasonable  time.^ 

By  custom  in  some  localities,  presentment  must  be  made  at  or  before  the  expi- 
ration of  sixty  days  from  the  issue  of  the  note,  unless  there  are  circumstances  to 
excuse  delay. 

The  case  is  stated  in  the  opinion. 
[Argument  not  reported.] 

Lathrop,  J.  This  is  an  action  against  the  defendant  as  indorser 
of  four  promissory  notes,  made  by  the  Jackson  Typewriter  Company, 
payable  to  the  defendant,  upon  demand,  and  indorsed  by  him  in 
blank.  One  note  is  dated  Dec.  19,  1899,  and  the  other  three  are  dated 
Jan.  5,  1900.    Demand  was  made  and  notice  given  on  April  4,  1900. 

In  the  Superior  Court,  after  the  introduction  of  evidence  not  ma- 
terial to  the  exceptions,  the  defendant  requested  the  judge  to  rule 
that  upon  all  the  evidence  the  plaintiff  was  not  entitled  to  recover. 
The  judge  refused  so  to  rule,  and  found  for  the  plaintiff;  and  the 
case  is  before  us  upon  the  defendant's  exceptions.  The  only  question 
in  the  case  is  whether  the  demand  was  made  within  a  reasonable  time. 

The  Sts.  of  1898,  c.  533,  §.71,2  jg  ^^  p^^t  as  follows:  "Where 
it  (the  instrument)  is  payable  on  demand  presentment  must  be  made 
within  a  reasonable  time  after  its  issue." 

Section  193  ^  of  the  same  act  provides :  "  In  determining  what 
is  a  '  reasonable  time '  or  an  ^  unreasonable  time '  regard  is  to  be 
had  to  the  nature  of  the  instrument,  the  usage  of  trade  or  business, 
if  any,  with  respect  to  such  instruments,  and  the  facts  of  the  par- 
ticular case." 

Before  the  St.  of  1898,  which  took  effect  on  Jan.  1,  1899,  was 
passed,  the  law  applicable  to  notes  payable  on  demand  was  regu- 
lated by  the  St.  of  1839,  c.  121,  which  was  retained  in  substance 
in  the  subsequent  compilations  of  the  statutes.  Section  1  of  this 
statute  provided,  in  substance,  that  the  maker  should  have  the  same 
defence  against  an  indorsee  as  against  a  payee.  Section  3  provided 
that,  on  any  promissory  note  payable  on  demand  made  after  the  act 

1  N.  I.  L.  §§  88,  209.  2  Id.  §  88.  8  id.  209. 


234  lis'DORSER'S   CONTRACT. 

took  effect,  a  demand  made  at  the  expiration  of  sixty  days  from  the 
date  thereof  without  grace,  or  at  any  time  within  that  term,  should 
be  deemed  to  be  made  within  a  reasonable  time.  Section  3  provided 
for  the  liability  of  indorsers. 

Section  1  of  this  act  was  slightly  changed  by  the  St.  of  1857,  c. 
192,  but  was  revived,  with  an  amendment  by  the  St.  of  1858,  c.  70. 
And  so  it  appears  in  the  Gen.  Sts.  c.  53,  §  10,  and  the  Pub.  Sts.  c. 
77,  §  14.  Sections  2  and  3  of  the  act  appear  in  the  Gen,  Sts.  c.  53, 
§  8,  and  the  Pub.  Sts.  c.  77,  §  13. 

We  have  no  doubt  that  the  section  of  the  Pub.  Sts.  c.  77,  last 
mentioned  has  been  repealed  by  §  197  of  the  St.  of  1898,  which  pro- 
vides :  "  All  acts  and  parts  of  acts  inconsistent  with  the  provisions 
of  this  act  are  hereby  repealed."  We  are  therefore  obliged  to  con- 
sider what  is  the  law  merchant,  which  was  in  force  in  this  Common- 
wealth before  the  St.  of  1839  took  effect,  and  which  is  restored  by 
the  St.  of  1898.1 

Before  the  St.  of  1839,  c.  121,  was  passed,  the  rule  was  well 
settled  that  as  to  a  promissory  note  payable  on  demand,  a  demand 
in  order  to  charge  an  indorser  must  be  made  within  a  reasonable 
time,  and  if  no  such  demand  was  made,  the  note  was  considered  as 
overdue  and  dishonored.  This  question  arose  also  in  another  class 
of  cases,  namely,  as  to  the  length  of  time  in  which  a  note  payable 
on  demand,  and  remaining  unpaid,  would  be  held  to  be  dishonored, 
and  subject  to  the  grounds  of  defence  which  would  be  open  to  the 
maker  in  a  suit  by  the  payee.  See  Paine  v.  Central  Vermont  Eail- 
road,  118  U.  S.  152,  160. 

But  while  the  general  rule  was  well  settled,  there  was  found  to 
be  great  difficulty  in  its  application;  and  it  was  said  to  be  impos- 
sible to  fix  any  precise  period,  as  each  case  depended  upon  its  par- 
ticular circumstances.  Parker,  C.  J.,  in  Field  v.  Nickerson,  13 
Mass.  131,  137.  In  Seaver  v.  Lincoln,  21  Pick.  267,  it  was  said  by 
Chief  Justice  Shaw,  "  One  of  the  most  difficult  questions  presented 
for  the  decision  of  a  court  of  law,  is,  what  shall  be  deemed  a  reason- 
able time,  within  which  to  demand  payment  of  the  maker  of  a  note 
payable  on  demand,  in  order  to  charge  the  indorser.  It  depends 
upon  so  many  circumstances  to  determine  what  is  a  reasonable  time 
in  a  particular  case,  that  one  decision  goes  but  little  way  in  estab- 
lishing a  precedent  for  another." 

As  to  what  has  been  held  by  this  court  to  be  a  reasonable  or  un- 
reasonable time,  the  cases  are  thus  summed  up  by  Mr.  Justice  Dewey, 
in  Ranger  v.  Gary,  1  Met.  369,  374:  "In  Field  v.  Nickerson,  13 
Mass.  131,  the  period  of  eight  months  was  held  not  to  be  within  a 
reasonable  time  to  make  a  demand  to  charge  the  indorser;  and  in 
Seaver  v.  Lincoln,  21  Pick.  267,  where  the  demand  was  made  in  seven 
days  after  the  date  of  the  note,  it  was  held  to  be  within  due  time. 

1  N.  I.  L.  §  212. 


MERRITT   V.   JACKSON.  235 

In  Sylvester  v.  Crapo,  15  Pick.  92,  a  note  that  had  remained  unpaid 
for  eleven  months  before  it  was  negotiated,  was  held  to  be  dishonored ; 
and  the  shorter  period  of  six  months  was,  in  Thompson  v.  Hale,  6 
Pick.  259,  held  sufficient  to  subject  it  to^  the  defence  of  a  note  over- 
due. On  the  other  hand,  a  note  indorsed  seven  days  after  its  date 
was  held,  in  Thurston  v.  M'Kown,  6  Mass.  428,  to  have  been  trans- 
ferred in  season  to  avoid  any  ground  of  defence  arising  from  the 
equities  between  the  original  parties." 

In  Eanger  v.  Gary  it  was  held  that  a  note  payable  on  demand 
was  not  to  be  regarded  as  overdue  if  indorsed  within  one  month  after 
its  date. 

In  the  case  before  us  no  evidence  was  introduced  of  "  the  usage 
of  trade  or  business,  if  any,  with  respect  to  such  instruments,"  nor 
do  the  facts  of  the  case  appear  apart  from  what  the  instrument 
itself  shows. 

We  have  no  doubt  that  when  the  holder  of  such  a  note  seeks  to 
hold  an  indorser,  the  burden  is  on  him  to  show  that  a  demand  was 
made  upon  the  maker  within  a  reasonable  time;  and  that  if  there 
is  any  usage  of  trade  or  any  fact  or  circumstance  to  excuse  a  delay, 
the  burden  is  on  him  to  show  it.  See  Keyes  v.  Fenstermaker,  24 
Cal.  329. 

It  is  urged,  however,  that  the  court  will  take  judicial  notice  of 
business  in  a  community  including  the  universal  practice  of  banks; 
and  attention  is  called  to  the  fact  that  in  the  charge  to  the  jury  in 
Field  V.  Nickerson,  13  Mass.  131,  132,  where  the  question  was 
whether  an  action  could  be  maintained  by  an  indorsee  against  an 
indorser  on  a  promissory  note  payable  on  demand,  where  the  demand 
was  made  on  the  maker  eight  months  after  the  date  of  the  note. 
Chief  Justice  Parker,  after  stating  to  the  jury  that  the  demand  must 
be  made  in  a  reasonable  time,  and  that  what  was  a  reasonable  time 
was  a  question  of  law  in  that  case,  further  instructed  the  jury,  "  that, 
all  the  parties  to  the  transaction  living  in  a  town  where  credit  for 
loans  of  money  among  merchants  is  commonly  given  for  thirty, 
sixty,  or  ninety  days,  the  indorser  must  be  considered  as  having 
contracted  with  reference  to  the  usual  period;  that  a  delay  of  eight 
months  was  unreasonable  .  .  ."  The  jury  were  directed  to  return 
a  verdict  for  the  defendant.  Nothing  is  said  on  this  subject  in  the 
opinion.  Whether  or  not  an  analogy  can  be  drawn  from  the  fact 
that  in  the  business  community  the  rate  of  credit  may  be  thirty, 
sixty,  or  ninety  days,  the  St.  of  1898,  c.  533,  §  193,  as  we  already 
have  pointed  out,  limits  the  question  of  usage  to  that  of  trade  or 
business  "  with  respect  to  such  instruments."  The  statute  took  effect 
on  January  1,  1899.  All  but  one  of  the  notes  in  suit  were  dated 
early  in  January  of  the  next  year.  We  are  not  aware  that  in  the 
.interval  any  usage  of  trade  or  business  with  respect  to  demand  notes 


236  INDOUSEU'S  CONTRACT. 

had  grown  up  different  from  that  which  had  had  the  force  of  law 
for  nearly  sixty  years. 

In  a  case  like  the  present,  in  the  absence  of  any  evidence  to  bring 
the  case  within  §  193  of  the  St.  of  1898,  we  are  of  opinion  that 
a  demand  on  the  maker  should  be  made  at  or  before  the  expiration 
of  sixty  days;  that  the  demand  in  this  case  was  not  made  within 
a  reasonable  time;  and  that  the  ruling  requested  should  have  been 
given. 

Exceptions  sustained. 

Note.  —  In  Yates  v.  Goodwin,  96  Me.  90,  an  action  was  brought  by  the 
holder  against  an  indorser  of  a  note  in  the  following  form  : 

"$1500.  BiDDEFORD,  March  16,  1894. 

On  demand  for  value  received  the  Ensor  Remedy  Company  of  Biddeford 
promises  to  pay  to  its  own  order  the  sum  of  fifteen  hundred  dollars  with  inter- 
est at  the  rate  of  four  per  cent  per  annum. 

The  Ensor  Remedy  Co. 

By  C.  E.  Goodwin,  Treas" 

The  note,  indorsed  by  the  Ensor  Co.,  and  by  the  defendant,  came,  through 
the  hands  of  several  intermediate  holders,  to  the  plaintiff,  who  was  a  holder 
for  value.  It  was  proved  that  presentment  was  made  on  the  makers,  on 
Nov.  13,  1894,  and  the  defendant  contended  that  such  presentment  was  not 
seasonable. 

It  was  said  by  Savage,  J.,  "  What  is  a  reasonable  time  within  which  pay- 
ment must  be  demanded,  in  order  to  hold  an  indorser,  is  a  matter  of  law. 
Goodwin  v.  Davenport,  47  Me.  112,  74  Am.  Dec.  478.  It  is  likewise  a  matter 
of  no  little  difficulty.  Said  Justice  Rice,  in  Goodwin  v.  Davenport,  supra, 
'the  precise  number  of  days,  weeks,  or  months,  even,  which  will  constitute  a 
"  reasonable  time  "  has  never  been,  although  a  question  of  law,  judicially  de- 
termined, but  is  made  to  depend  upon  circumstances  as  variable  and  uncertain 
as  are  the  transactions  and  characters  of  men.'  Periods  ranging  from  a  few 
days  to  many  months  have  severally  been  held  to  be  a  'reasonable  time,'  while 
in  other  cases  by  the  lapse  of  similar  periods,  without  demand,  indorsers  have 
been  released. 

The  purpose  of  the  note,  and  the  intention  of  the  parties  respecting  it  are 
important  factors.  Was  the  note  given  in  payment  of  indebtedness  in  the 
current  course  of  business  ?  If  so,  the  natural  presumption  would  be  that  it 
was  expected  to  be  paid  without  long  delay.  Or  was  the  note  given  for  a 
loan,  and  with  interest?  If  so,  it  is  held  that  the  indorser  remains  liable 
■without  immediate  presentment.  3  Randolph,  Com.  Paper,  p.  82;  1  Daniel  on 
Negotiable  Inst.,  p.  451.  The  parties  do  not  expect  immediate  or  early  de- 
mand. Such  a  demand,  if  complied  with,  would  defeat  the  very  object  of  the 
loan.  It  is  held  also  that  the  provision  in  a  demand  note  for  the  payment  of 
interest  is  material,  as  raising  the  presumption  that  immediate  payment  was 
not  intended  by  the  parties.  3  Randolph  on  Com.  Paper,  83.  These  views 
are  well  supported  by  the  authorities.  Lockwood  v.  Crawford,  18  Conn.  361; 
Wethey  v.  Andrews,  3  Hill,  582;  Chartered  Mercantile  Bank  i».  Dickson, 
L.  R.  3  C.  P.  574;    Cate  v.  Patterson,  25  Mich.   191;    Gascoyne  v.   Smith, 


ORIDGE  V.   SHERBORNE.  237 

1  McC.  &  Y.  338;  Merritt  v.  Todd,  23  N.  Y.  28,  80  Am.  Dec.  243;  Parker  v. 
Stroud,  98  N.  Y.  379,  50  Am.  Rep.  683. 

The  note  in  question  here  was  given  for  a  loan,  and  it  bore  interest.  The 
interest  was  at  lower  rate  than  would  have  been  recoverable  had  no  mention 
been  made  of  the  rate  of  interest.  This  fact  is  itself  significant.  For  if  it 
was  expected  that  [payment  of]  the  note  was  to  be  demanded  within  a  short 
time,  would  the  parties  have  been  likely  to  stipulate  a  less  rate  than  the 
statute  rate?  Besides,  the  maker  was  a  corporation  borrowing  money.  The 
indorsers,  some  or  all  of  them,  were  the  officers  of  the  corporation.  Such  was 
the  defendant.  It  can  hardly  be  supposed  that  this  money  was  hired  with  the 
expectation  on  the  part  of  any  one  concerned  that  payment  of  the  note  was  to 
be  immediately  demanded  or  made,  or  indeed,  within  any  short  period. 

We  think,  on  the  contrary,  that  the  note,  given  for  a  loan,  was  intended  to 
be  a  continuing  security,  an  investment  of  a  more  or  less  permanent  character. 
Being  on  demand,  the  holder  might,  if  he  chose,  demand  payment  at  any  time, 
but  it  was  not  expected  that  he  would  make  immediate  or  early  demand. 
We  think  that  he  was  not  required  to  do  so,  to  hold  the  indorsers." 

The  defendant  was  defaulted. 


OEIDGE   V.   SHERBORNE. 

Court  of  Exchequer  of  England,  May,  1843.     11  Meeson  &  W.  374. 

A  promissory  note  payable  by  instalments  is  assignable  within  the  Stat.  3  &  4 
Anne,  c.  9 ;  [and  the  maker  is  entitled  to  the  days  of  grace  upon  the  falling  due  of 
each  instalment.^  ] 

Assumpsit  by  indorsee  against  payee  of  a  promissory  note,  dated 
19th  November,  1838,  payable  to  the  defendant  by  instalments  on 
the  19th  of  November  in  each  succeeding  year,  for  seven  years.  This 
action  was  brought  to  recover  the  amount  of  the  instalment  due  on 
the  19th  of  November,  1842.  There  were  pleas  denying  that  the 
note  was  duly  presented  for  payment,  or  that  the  defendant  had  due 
notice  of  the  presentment  and  dishonor.  At  the  trial  it  appeared 
that  the  note  was  presented  for  payment  of  the  instalment  in  ques- 
tion on  the  22d  of  November,  the  plaintiff  thus  allowing  the  three 
days  of  grace  usually  given  in  the  case  of  negotiable  instruments; 
it  was  dishonored,  and  notice  of  the  dishonor  was  given  to  the  defend- 
ant the  next  day.  It  was  objected  for  the  defendant  that  the  pre- 
sentment and  notice  of  dishonor  were  too  late;  that  a  promissory 
note  payable  by  instalments  was  not  a  negotiable  instrument  within 
the  law  and  custom  of  merchants,  and  the  maker  thereof  was  not 
entitled  to  days  of  grace  at  all ;  or,  if  he  were,  they  could  be  allowed 
only  for  payment  of  the  last  instalment.     The  judge  overruled  the 

>  Grace  is  generally  abolished  by  the  Statute;  but  of.  N.  I.  L.  §  102,  allowing 
three  days  of  grace  upon  a  draft  or  bill  of  exchange,  made  payable  within  this  State 
at  sight,  unless  there  is  a  stipulation  to  the  contrary. 


238  INDORSE U'S   CONTRACT. 

objection,  and  the  plaintiff  obtained  a  verdict.    Eule  nisi  for  a  new 
trial. 

[Argument  reported.] 

Parke,  B.  I  think  the  rule  in  this  case  ought  to  be  discharged. 
The  question  is,  whether,  on  a  promissory  note  payable  by  instalments, 
the  usual  three  days  of  grace  are  to  be  allowed  or  not.  In  order  to 
determine  this  point,  the  first  question  that  presents  itself  is,  whether 
such  an  instrument  is  a  promissory  note  at  all,  within  the  St.  3  &  4 
Anne,  c.  9,  so  as  to  entitle  any  party  into  whose  hands  it  may  come 
to  sue  upon  it;  for,  if  so,  there  will  be  no  difficulty  in  extending  to 
it  the  same  rule  as  prevails  in  the  case  of  bills  of  exchange;  namely, 
that  days  of  grace  are  to  be  allowed  in  all  cases  where  a  sum  of 
money  is  by  such  a  negotiable  instrument  made  payable  at  a  fixed 
day.  Now,  in  order  to  render  this  valid  as  a  promissory  note,  we 
must  first  consider  whether  it  might  be  sued  on  by  the  original 
parties  to  it.  It  is  well  known  that,  before  the  passing  of  the  St. 
3  &  4  Anne,  c.  9,  it  was  the  opinion  of  Lord  Holt  that  a  promissory 
note  was  only  evidence  of  a  debt,  and  not  an  instrument  of  obligatory 
force  in  itself.  Then  came  the  statute,  which  puts  promissory  notes 
on  the  footing  of  inland  bills  of  exchange.  The  preamble  recites 
that  it  had  been  held  "  that  notes  in  writing,  .  .  .  are  not  assign- 
able or  indorsable  over,  within  the  custom  of  merchants,  to  any 
other  person;  and  that  such  person  to  whom  the  sum  of  money 
mentioned  in  such  note  is  payable  cannot  maintain  an  action  by 
the  custom  of  merchants  against  the  person  who  first  made  and 
signed  the  same."  .  .  .  The  statute  is  thus  directed  to  two  grievances, 
—  that  the  note  is  not  assignable,  and  that  it  is  not  the  subject  of  an 
action.  Therefore,  .  .  .  the  statute  in  the  first  section  goes  on  to 
enact  that  "  all  notes  in  writing,  whereby  any  person,  body  politic 
or  corporate,  shall  promise  to  pay  to  any  other  person  or  persons, 
body  politic  or  corporate,  his,  her,  or  their  order,  or  unto  bearer, 
any  sum  of  money  mentioned  in  such  note,  shall  be  taken  and  con- 
strued to  be,  by  virtue  thereof,  due  and  payable  to  any  such  person 
or  persons,  etc.,  to  whom  the  same  is  made  payable."  These  words 
are  general,  and  without  any  limitation  as  to  the  mode  in  which 
the  money  is  to  be  paid.  The  section  goes  on  to  enact  that  "  every 
such  note  shall  be  made  assignable  or  indorsable  over."  ...  On  the 
provisions  of  this  statute,  therefore,  we  find  no  limitation  imposed 
as  to  the  manner  in  which  the  money  is  to  be  made  payable;  and 
consequently,  unless  there  is  some  established  rule  or  settled  practice 
to  the  contrary,  a  promissory  note  must  be  deemed  good  within  the 
statute,  whether  it  be  to  pay  an  entire  sum  at  once,  or  to  pay  it  by 
instalments.  No  case  has  been  cited  to  show  that  a  promissory  note 
in  the  latter  form  is  not  good,  and  we  must  therefore  look  at  the 


VINTON   V.   KING.  239 

course  pursued  in  practice  since  the  statute.  Speaking  from  modern 
experience  (and  mine  in  this  respect  has  been  of  some  standing), 
I  have  no  doubt  that  numerous  actions  have  been  brought  by  the 
original  parties  in  whose  favor  such  notes  have  been  made;  indeed, 
that  this  is  so  every  gentleman  in  the  habit  of  drawing  under  the  bar 
can  testify ;  and  it  is  now  much  too  late  to  say  such  actions  as  those 
are  not  maintainable.  And  if  promissory  notes  are  within  the  first 
clause  of  the  statute,  I  see  no  sufficient  reason  why  they  should  not 
also  be  within  the  second,  and  consequently  assignable  to  an  in- 
dorsee. Besides  the  invariable  practice  on  this  subject,  and  the  fact 
that  actions  on  notes  of  this  kind  have  been  so  numerous,  that  it  is, 
I  may  say,  impossible  that  the  present  objection  should  not  have  been 
taken  in  some  of  them,  if  there  were  really  any  weight  in  it,  several 
reported  cases  have  been  referred  to,  in  which  such  actions  were 
brought,  and  no  objection  taken  that  they  would  not  lie  on  the 
ground  suggested  in  this  case,  although  other  objections  were  taken. 
One  is  that  of  Donaldson  v.  Thompson,  6  M.  &  W.  316,  to  which  may 
be  added  those  of  Ashford  v.  Hand,  Andr.  370,  and  Jossehni  v. 
Lacier,  10  Mod.  294.  If  there  had  ever  been  any  idea  that  a  promis- 
sory note  of  this  nature  was  not  within  the  statute  of  Anne,  the  ob- 
jection would  certainly  have  been  taken ;  although  I  rely  more  on  the 
established  modern  usage,  and  think  it  too  late  to  raise  this  objection 
now.  If,  then,  this  is  admitted  to  be  a  promissory  note,  suable  on 
and  indorsable  under  the  statute,  the  next  question  is  respecting 
the  allowance  of  the  usual  days  of  grace  upon  it.  Now,  in  the 
case  of  Brown  v.  Harraden,  4  T.  E.  148,  it  is  said  that,  with  respect 
to  the  allowance  of  days  of  grace,  the  rule  is  exactly  the  same  in  the 
case  of  a  promissory  note  as  of  a  bill  of  exchange;  namely,  that 
they  are  always  to  be  allowed,  when  the  instrument  is  for  the  pay- 
ment of  money  at  a  certain  time,  as  after  a  certain  number  of  days 
or  after  sight,  but  not  when  it  is  only  payable  on  demand.  That  rule 
we  must  adopt  in  this  case;  and  as  this  note  is  suable  on  and  in- 
dorsable under  the  statute  of  Anne  in  the  same  manner  as  bills  of 
exchange  were  before,  —  as  both  instruments  are  thereby  simply 
put  upon  the  same  footing,  —  the  days  of  grace  for  both  must  be 
the  same,  and  consequently  ought  to  be  allowed  on  this  promissory 
note. 

EoLFE  and  Alderson,  BB.,  delivered  concurring  opinions. 


VINTON   V.    KING. 

Supreme  Court  of  Massachusetts,  October,  1862.     4  Allen,  562. 

And  it  must  be  presented  at  the  maturity  of  each  instalment. 

Writ  of  entry  to  foreclose  a  mortgage.    The  defence  was  that  the 
note  and  mortgage  were  obtained  by  duress  and  fraud,  and  were  given 


240  indorser's  contract. 

for  an  illegal  consiclGration.  For  the  purpose  of  obtaining  a  de- 
cision upon  the  questions  of  law  arising  in  the  case,  Allen,  C.  J., 
directed  a  verdict  for  the  plaintiff,  in  the  Superior  Court,  upon 
evidence  which  is  sufficiently  stated  in  the  opinion;  and  the  de- 
fendant alleged  exceptions. 

[Argument  reported.] 

Metcalf,  J.  The  mortgage,  under  which  the  plaintiff  claims 
possession  of  the  premises  demanded  in  his  writ,  was  given  to  secure 
payment  of  a  note,  dated  April  26,  1858,  of  the  following  tenor: 
"  Two  years  after  date,  by  instalments  of  $53  in  every  six  months 
after  this  date,  until  fully  paid,  I  promise  to  pay  Peter  Bruyett,  or 
bearer,  the  sum  of  two  hundred  and  twelve  dollars  and  interest  in 
manner  above  stated.  John  King."  This  note,  though  payable  by 
instalments,  was  negotiable,  11  M.  &  W.  374  (Oridge  v.  Sherborne), 
and  was  transferred,  and  the  mortgage  assigned  to  the  plaintiff, 
about  three  months  after  the  first  instalment  was  overdue  and 
unpaid.  This  action  was  commenced  on  the  30th  of  May,  1859, 
after  the  second  instalment  was  made  payable.  And  if  the  plaintiff 
is  entitled  to  any  judgment,  it  is  only  to  a  conditional  judgment  for 
possession ;  to  wit,  unless  the  defendant  pay  to  him,  within  the  time 
specified  by  statute,  such  sum  as  shall  be  found  due  on  the  mortgage. 
Eev.  Sts.  c.  107,  §  5,  and  Gen.  Sts.  c.  140,  §  5.^  If  the  court  find 
that  nothing  is  due  on  the  mortgage,  the  plaintiff  cannot  have 
judgment. 

In  an  action  brought  by  a  mortgagee  against  his  mortgagor,  on 
a  mortgage  given  to  secure  payment  of  a  note,  the  defendant  may 
show  the  same  matters  in  defence  (the  Statute  of  Limitations  ex- 
cepted, Thayer  v.  Mann,  19  Pick.  535)  which  he  might  show  in 
defence  of  an  action  on  the  note.  If,  therefore,  this  action  were  by 
the  mortgagee,  Bruyett,  instead  of  his  assignee,  the  plaintiff,  the 
defendant  might  successfully  defend,  by  showing  that  the  note  and 
mortgage  were  obtained  from  him  by  duress,  and  the  plaintiff  does 
not  deny  that  the  same  defence  may  be  made  against  him,  if,  when 
the  note  was  transferred  to  him,  it  was  dishonored  by  non-payment 
of  the  first  instalment  —  it  being  admitted  law,  that  he  who  takes  a 
note  after  it  is  due  takes  it  subject  to  all  objections  and  equities  to 
which  it  was  liable  in  the  hands  of  him  from  whom  he  takes  it,  and 
to  the  same  defences,  in  a  suit  against  the  maker,  which  the  maker 
might  set  up  in  an  action  against  him  by  the  payee ;  that  the  circum- 
stance that  a  note  is  overdue  makes  it  incumbent  on  the  party  receiv- 
ing it  to  satisfy  himself  that  it  is  a  good  one,  and  that  if  he  omit  so 
to  do,  he  must  stand  in  the  situation  of  him  who  was  holder  at  the 
time  it  was  due.    Bayley  on  Bills,  2d  Amer.  ed.,  133,  544 ;  Chit.  Bills, 

1  RcT.  Laws  of  Mass.,  ch.  187,  §  5. 


VIXTON   V.   KING.  241 

12th  Amer.  ed.,  247,  248,  10th  Amer.  ed.,  216-218 ;  3  Kent  Com., 
6th  ed.,  90;  Gold  v.  Eddy,  1  Mass.  1;  American  Bank  v.  Jenness, 
2  Met.  289 ;  Andrews  v.  Pond,  13  Pet.  79 ;  Tucker  v.  Smith,  4  Greenl. 
415.  But  the  ground  assumed  by  the  plaintiff  is,  that  in  this  case 
the  note  had  not,  within  the  rule  of  law  on  this  subject,  come  to 
maturity,  and  was  not  overdue  and  dishonored  before  it  was  trans- 
ferred to  him,  because  the  time  for  payment  of  the  last  three  instal- 
ments had  not  then  come.  This  ground  is  not  maintainable.  As  to 
the  first  instalment  of  $53  in  six  months,  and  interest  on  $212,  the 
note  had  come  to  maturity  and  was  overdue  and  dishonored  when  the 
plaintiff  took  it ;  and  as  to  the  amount  of  that  instalment,  it  is  not 
to  be  doubted  that  the  defendant  may  make  the  same  defence  against 
the  plaintiff,  which  he  might  have  made  against  the  payee.  And  we 
are  of  opinion  that  he  may  make  the  same  defence  to  the  whole  note. 
The  note  is  a  single  contract  to  pay  $212  in  four  half-yearly  instal- 
ments, and  the  plaintiff  took  it  with  notice  on  its  face  that,  as  to  the 
first  instalment  the  defendant  might  have  a  justifiable  cause  for  with- 
holding payment,  whatever  that  cause  might  be;  whether  a  cause 
which  affected  that  instalment  only,  —  as  a  release  thereof  by  the 
payee,  or  a  legal  set-off  against  him  to  the  amount  thereof,  —  or  a 
cause  which,  between  him  and  the  payee,  vitiated  the  whole  note,  as 
want  or  failure  of  consideration,  unlawful  consideration,  fraud  or 
duress.  And  if  the  payee  had  sued  for  the  recovery  of  the  first  instal- 
ment, before  the  second  was  made  payable,  the  defendant  might  have 
defeated  the  action  by  showing  that  the  note  was  wholly  void ;  and  a 
judgment  for  him,  on  such  ground  of  defence,  would  have  been  con- 
clusive against  the  maintenance,  by  the  payee,  of  a  subsequent  action 
to  recover  the  other  instalments.  Black  Eiver  Savings  Bank  v.  Ed- 
wards, 10  Gray,  387. 

The  case  of  Clark  v.  Pease,  41  N.  H.  414,^  to  which  we  were 
referred  by  the  plaintiff,  would  have  been  an  authority  in  his  favor, 
if  he  had  received  the  note  before  it  was  dishonored,  and  had  shown 
that  he  took  it  bona  fide,  and  paid  a  valuable  consideration  for  it. 
The  authorities  are  numerous,  that  against  such  an  indorsee  or  bearer, 
the  fact  that  the  note  was  originally  obtained  by  duress  is  not  a  legal 
defence. 

Exceptions  sustained. 

1  Post,  p.  407. 


16 


242  indokser's  contract. 

DAJTA   V.    SAWYER. 

Supreme  Court  of  Maine,  April,  1843.     22  Maine,  244. 

Presentment  should  be  made  at  a  reasonable  honr  of  the  day.^ 
Presentment  of  a  promissory  note  to  the  maker  at  near  midnight,  after  he  has 
retired  to  rest,  is  not  presumptively  at  a  reasonable  hour. 

This  case  was  submitted  on  the  following  statement  of  facts :  The 
action  is  on  a  promissory  note,  signed  by  T,  Sawyer  &  Co.,  dated 
December  24,  1838,  for  $202.50,  on  four  months,  payable  to  and 
indorsed  by  the  defendant. 

It  is  agreed  that  on  the  day  the  note  fell  due,  George  W.  Smith 
came  to  the  house  occupied  by  said  Thorndike  Sawyer  and  Samuel  H. 
Sawyer,  the  defendant,  in  the  evening,  between  eleven  and  twelve 
o'clock,  called  up  said  T.  Sawyer  from  his  bed,  and  presented  the  note 
to  him  for  payment,  which  he  did  not  pay,  and  left  with  him  a  notice 
and  demand  for  payment,  and  delivered  another  notice  of  non-pay- 
ment by  the  makers  of  the  note,  directed  to  said  S.  H.  Sawyer,  and 
demand  of  payment  to  said  T.  Sawyer  for  said  Samuel,  which  said 
Thorndike  did  not  deliver  to  said  Samuel.  Said  Samuel  was  then  in 
the  house,  but  was  in  bed.    He  had  his  residence  in  the  same  house. 

The  court  were  to  enter  a  nonsuit  or  default,  as  they  might  deter- 
mine to  be  the  law  in  the  matter. 

[Argument  not  reported.] 

Shepley,  J.  This  case  is  presented  upon  an  agreed  statement  of 
facts,  from  which  it  appears  that  a  demand  for  payment  was  made 
upon  the  maker  of  the  note,  between  eleven  and  twelve  o'clock  at 
night  on  the  day  that  it  became  payable,  by  calling  him  from  his 
bed ;  and  that  he  did  not  pay  it.  There  is  no  further  statement  of  any- 
thing else  said  or  done,  except  that  a  notice  and  demand  for  payment 
was  left  with  him.  When  a  bill  or  note  is  payable  at  a  banking- 
house,  or  other  place,  where  it  is  well  known  that  business  is  trans- 
acted only  during  certain  hours  of  the  day,  the  law  presumes  that  the 
parties  intended  to  conform  to  such  established  course  of  business, 
and  requires  that  a  demand  should  be  made  during  those  business 
hours.  Parker  v.  Gordon,  7  East,  385.  The  cases  of  Garnett  v.  Wood- 
cock, 1  Stark.  475,  and  of  Henry  v.  Lee,  2  Chitty,  124,  may  show  an 
exception  to  this  rule  that,  when  a  person  is  found  at  such  place 
after  business  hours  authorized  to  give  an  answer,  the  demand  will  be 
good ;  while  it  may  be  difficult  to  reconcile  these  cases  with  the  case 
of  Elford  V.  Teed,  1  M.  &  S.  28.  When  the  bill  or  note  is  not  payable 
at  a  place  where  there  are  established  business  hours,  a  presentment 
for  payment  may  be  made  at  any  reasonable  hour  of  the  day.    Leftley 

1  N.  I.  L.  §  89,  2. 


FARNSWORTH  V.   ALLEN.  243 

V.  Mills,  4  T.  K.  174;  Barclay  v.  Bailey,  2  Camp.  527;  Triggs  v. 
Newnham,  10  Moore,  249;  Wilkins  v.  Jadis,  2  Barn.  &  Adol.  188. 
What  hour  may  be  a  reasonable  one  has  come  under  consideration  in 
those  cases.  In  the  first  of  them  Mr.  Justice  Buller  observes,  that 
"  to  say  that  the  demand  should  be  postponed  till  midnight,  would  be 
to  establish  a  rule  attended  with  mischievous  consequences."  In  the 
second,  Lord  Ellenborough  said,  "  If  the  presentment  had  been 
during  the  hours  of  rest,  it  would  have  been  altogether  unavailing." 
In  the  third,  this  remark,  among  others,  is  quoted  and  approved  by 
C.  J.  Best.  In  the  fourth.  Lord  Tenterden  remarked,  that  "  a  pre- 
sentment at  twelve  o'clock  at  night,  when  a  person  has  retired  to 
rest,  would  be  unreasonable."  These  observations,  so  just  and  so 
applicable  to  this  case,  authorize  the  conclusion  that  the  demand  was 
not  made  at  a  reasonable  hour,  unless  the  fact  that  the  maker  was 
seen  and  actually  called  upon  at  that  time  should  make  a  difference. 
Perhaps,  in  analogy  to  the  exception  already  noticed,  it  might  be 
proper  to  admit  of  one  in  this  and  the  like  cases,  if  it  should  appear 
from  the  answer  made  to  the  demand  that  there  was  a  waiver  of  any 
objection  as  to  the  time,  or  that  payment  would  not  have  been  made 
upon  a  demand  at  a  reasonable  hour.  But  there  is  nothing  in  this 
agreed  statement  to  show  that  payment  might  not  have  been  refused 
because  the  demand  was  made  at  such  an  hour  that  the  maker  did 
not  choose  to  be  disturbed,  or  because  he  could  not  then  have  access 
to  funds  prepared  and  deposited  elsewhere  for  safety. 

Plaintiff  nonsuit. 


FAENSWORTH    v.    ALLEN. 

Supreme  Court  of  Massachusetts,  October,  1855.     4  Gray,  453. 

But  presentment  as  late  as  nine  o'clock  in  the  evening,  in  August,  is  reasonable 
if  due  endeavor  under  all  the  circumstances  down  to  that  time  has  been  made  to 
make  it,  without  success. 

Action  of  contract  against  the  indorser  of  the  following  promis- 
sory note:  "Boston,  May  23,  1853.  Three  months  after  date  I 
promise  to  pay  to  the  order  of  Walter  M.  Allen  one  hundred  and  fifty 
dollars,  value  received.    Francis  Freeman." 

At  the  trial  in  the  Court  of  Common  Pleas,  a  witness  testified  that 
he  received  the  note,  at  the  close  of  bank  hours  on  the  last  day  of 
grace,  from  the  Grocers'  Bank  in  Boston,  who  had  received  the  note 
for  collection  from  the  Cambridge  Market  Bank,  but  did  not  know 
the  residence  of  the  maker  or  indorser ;  that  he  inquired  of  a  director 
of  the  Cambridge  Market  Bank,  and  learned  that  the  maker  lived  at 
Winchester  and  the  indorser  at  North  Cambridge;  and  the  sam& 
afternoon  carried  the  note  to  a  notary  public  in  Charlestown,  and  told 
him  where  the  parties  resided. 


244  indokser's  contract. 

The  notary  public  testified  that,  as  soon  as  he  could  after  receiving 
the  note  for  protest,  he  went  to  the  house  of  the  maker  (about  ten 
miles  from  Boston),  and  arrived  there  about  nine  o'clock  in  the 
evening;  that  there  was  no  light  in  the  house,  and  the  inmates  ap- 
peared to  have  retired  for  the  night ;  that  he  rang  the  bell,  and  after 
some  time  the  maker  came  to  the  door  with  a  light ;  and  he  presented 
the  note,  stated  its  contents,  and  demanded  payment,  which  the  maker 
refused,  saying  that  he  could  not,  or  should  not,  or  would  not  pay  it ; 
that  he  returned  with  the  note  to  Charlestown,  and  on  the  same 
evening  put  in  the  post-office  a  proper  notice  of  dishonor,  addressed 
to  the  defendant  at  North  Cambridge. 

The  defendant  contended  that  the  demand  proved  was  not  suffi- 
cient to  charge  the  indorser.  But  Hoar,  J.,  ruled  otherwise,  the  jury 
returned  a  verdict  for  the  plaintiff,  and  the  defendant  alleged 
exceptions. 

[Argument  reported.] 

BiGELOW,  J.  The  note  declared  on,  not  being  payable  at  a  bank, 
or  at  any  place  where  business  was  transacted  during  certain  stated 
hours  in  each  day,  was  properly  presented  to  the  maker  at  his  place 
of  residence.  It  was  also  the  duty  of  the  holder  to  present  it  within 
reasonable  hours  on  the  day  of  its  maturity.  No  fixed  rule  can  be 
established,  by  which  to  determine  the  hour  beyond  which  a  present- 
ment, in  such  case,  will  be  unreasonable  and  insufficient  to  charge  an 
indorser.  Generally,  however,  it  should  be  made  at  such  hour  that, 
having  regard  to  the  habits  and  usages  of  the  community  where  the 
maker  resides,  he  may  be  reasonably  expected  to  be  in  a  condition  to 
attend  to  ordinary  business.  In  the  present  case,  taking  into  consid- 
eration the  distance  of  the  place  of  residence  of  the  maker  from  Bos- 
ton, where  the  note  was  dated,  and  where  it  was  held  when  it  became 
due;  the  means  that  were  taken  to  ascertain  the  residence  of  the 
maker,  and  the  season  of  the  year  at  which  the  note  fell  due,  we  are 
of  opinion  that  a  presentment  at  nine  o'clock  in  the  evening  was 
Reasonable  and  sufficient.  It  is  quite  immaterial  that  the  maker  and 
his  family  had  retired  for  the  night.  The  question  whether  a  pre- 
sentment is  within  reasonable  time  cannot  be  made  to  depend  on  the 
private  and  peculiar  habits  of  the  maker  of  a  note,  not  known  to  the 
holder;  but  it  must  be  determined  by  a  consideration  of  the  circum- 
stances which,  in  ordinary  cases,  would  render  it  seasonable  or  other- 
wise. Barclay  v.  Bailey,  2  Camp.  527;  Triggs  v.  Newnham,  10  Moore, 
249,  and  1  Car.  &  P.  631 ;  Wilkins  v.  Jadis,  2  B.  &  Ad.  188;  Cayuga 
County  Bank  v.  Hunt,  2  Hill  (N.  Y.),  635. 

Exceptions  overruled. 


GATES   V.   BEECHER.  245 

GATES    V.    BEECHEE. 

Court  of  Appeals  of  New  York,  April,  1875.     60  N.  Y.  518. 

If  the  parties  required  to  pay  are  jointly  liable,  presentment  must  be  made  to  all,* 
except  wliere  they  are  partners,  =^  or  the  relation  of  agency  for  payment  exists 
between  them. 

Action  by  the  indorsee  against  the  indorser  of  a  promissory  note 
for  $800,  dated  May  31,  1870,  payable  in  two  years.  Verdict  for  the 
plaintiff,  and  the  defendant  appealed.  The  facts  further  appear  in 
the  opinion. 

[Argument  reported.] 

FOLGER,  J.   .   .   . 

No  place  of  payment  was  named  in  the  note.  In  such  case,  demand 
of  payment  at  the  usual  place  of  business  of  the  maker,  though  he  be 
absent,  is  sufficient ;  or  at  his  residence ;  or  to  him  in  person.  Holtz 
V.  Boppe,  37  N.  Y.  634.  And  where  such  a  note  is  made  by  a  part- 
nership a  demand  of  one  of  the  partners  in  person,  or  a  demand  at 
the  usual  place  of  business  of  the  partnership,  is  sufficient.  Story  on 
Promissory  Notes,  §  239. 

The  makers  of  the  note  in  suit  were  partners,  and  it  was  made  by 
them  as  such,  in  their  partnership  name;  demand  of  payment  was 
made  on  the  proper  day,  of  one  of  them  in  person,  after  the  notary 
had,  on  the  same  day,  gone  to  the  last  usual  place  of  business  of  the 
partnership,  for  the  purpose  of  making  demand  there,  and  found  no 
one  of  the  firm.  The  name  of  the  firm  was  Bassett,  Beecher,  &  Co. ; 
and  on  the  question's  being  asked  Bassett,  when  a  witness,  "  When 
did  Bassett,  Beecher  &  Co.  stop  business?"  he  replied,  "They  were 
thrown  into  bankruptcy  in  June,  1871."  I  think  that  we  may  infer 
from  this  that,  by  proceedings  in  the  Bankrupt  Court,  the  partner- 
ship was  declared  bankrupt,  and  its  effects  and  affairs  taken  charge 
of  by  the  officers  of  the  law.  The  partners  had  separated,  though 
there  was  no  formal  dissolution  of  their  partnership  by  them.  But 
bankruptcy  of  one  member,  or  of  all  the  members  of  a  firm,  works  a 
dissolution  of  the  copartnership.    Story  on  Partn.,  §  313. 

On  this  state  of  facts  and  the  law,  it  is  contended  by  the  learned 
counsel  for  the  appellant  that  the  demand  for  payment  of  the  note 
should  have  been  made  of  each  of  the  former  partners.  He  cites  no 
authority  for  his  position.  I  have  been  unable  to  find  any.  If,  by 
the  dissolution  of  the  partnership  by  bankruptcy,  and  the  separation 
of  the  partners,  they  must  thereafter  be  treated  as  joint  makers  who 
are  not  partners,  I  think  that  the  force  of  the  authorities  is  that  to 
charge  an  indorser  of  their  note,  a  demand  must  be  made  of  each  of 

1  N.  I.  L  §  95.  2  Id.  §  94. 


246  indoi^ser's  contract. 

them,  save  where  the  other  circumstances  are  such  as  to  excuse  a  de- 
mand. For  to  charge  the  indorser  of  the  note  of  joint  makers,  not 
partners,  demand  must  be  made  on  each.  It  was  so  held  in  Union 
Bank  v.  Willis,  8  Met.  504,  which  case  was  approved  in  Arnold  v. 
Dresser,  8  Allen,  435.  In  Willes  v.  Green,  5  Hill,  232,  Nelson,  C.  J., 
said  it  was  so  settled;  Harris  v.  Clark,  10  Ohio,  5,  is  to  the  contrary, 
but  tliat  case  is  limited  in  Greenough  v.  Smead,  3  Ohio  St.  415. 

It  is  seen,  therefore,  that  there  is  a  distinction  taken  between  the 
case  of  a  note  of  joint  makers  who  are  not  partners,  and  a  note  of 
partners  who  are  still  partners  at  the  maturity  of  the  note.  That  dis- 
tinction rests  upon  the  fact  that  partners  are  but  one  person,  in  legal 
contemplation ;  that  each  partner,  acting  in  such  capacity,  is  not  only 
capable  of  performing  what  all  can  do,  and  of  receiving  and  paying 
out  that  which  belongs  to  all,  but  by  such  acts  necessarily  binds  them 
all;  that,  as  incident  to  such  joint  relations,  all  of  the  partners  are 
affected: by  the  knowledge  of  one.  These  things  do  not  pertain  to  the 
relation  of  joint  makers  who  are  not  partners.  Hence,  while  a  de- 
mand of ;[ upon]  one  partner  is  equivalent  to  a  demand  of  [upon]  all, 
a  demand  of  .one  of  joint  makers  not  partners  is  not.  8  Met.,  supra. 
And  so  a  demamd  upon  one  partner  is  sufficient,  because  he  represents 
the  firm,.aiid.a (dishonor  by  one  is  a  dishonor  by  all,  and  each  is  pre- 
sumed to'haTe-authority  to  act  for  the  others ;  while  in  the  case  of  a 
note  of  joint  makers  not  partners,  the  indorser  has  a  right  to  rely 
upon  the  responsibility  of  all  and  each,  and  may  insist  upon  a  dis- 
honor by  each.  Story  on  Prom.  Notes,  §  255.  So  that  the  inquiry 
seems  to  be,  whether  a  dissolution  of  a  partnership,  effected  by  the 
bankruptcy  thereof,  has  so  far  changed  the  relations  of  the  members 
of  it  as  that  the  act  or  knowledge  of  one  does  not  affect  the  rest. 
Undoubtedly  a  dissolution  of  partnership,  however  brought  about, 
puts  an  end  to  certain  of  the  joint  powers  and  authority  of  all  the 
partners.  Perhaps  it  may  be  said  that  no  one  of  the  partners  can  do 
any  act  in  any  manner  inconsistent  with  the  primary  duty  of  winding 
up  the  whole  concerns  of  the  copartnership.  This  is  emphatically 
the  case  when  the  dissolution  has  been  wrought  by  the  bankruptcy 
of  the  firm,  for  then  the  effects  thereof  have  passed  into  the  control  of 
the  courts,  and  all  payments  therefrom  or  chargeable  thereon  are  to 
be  in  the  direction  of  the  court,  or  according  to  its  rules  and  prac- 
tice. The  principle  on  which  a  partner,  during  the  existence  of  a 
partnership,  may  by  his  act  bind  his  copartners,  is  that  which  gov- 
erns the  relation  of  agent  and  principal.  The  power  of  an  agent  to 
bind  his  principal  ceases  when  the  agency  is  ended;  so  that  even 
pa)'ment  by  a  former  agent  of  a  valid  debt  against  his  former  prin- 
cipal gives  him  no  right  against  the  latter.  The  principle  has  not, 
however,  been  carried  so  far  in  the  case  of  a  copartner.  His  rela- 
tions with  the  other  members  of  the  firm  have  not  been  entirely 
severed.    He  may,  from  his  own  means,  pay  a  valid  subsisting  debt 


GATES  V.   BEECHER.  247 

against  the  copartnership,  and  have  the  right  to  claim  an  allowance 
therefor  on  the  settlement  of  affairs,  or  contribution  from  the  others. 
Major  V.  Hawkes,  12  111.  298.  And  a  general  statement  has  been 
made  by  a  text  writer  of  repute,  that  every  act  of  administration 
which  is  necessary  for  winding  up  the  concern  may  be  effectually  done 
by  one  partner,  and  the  rest  be  bound.  2  Bell  Comm.  bk.  7,  c.  2, 
p.  643,  5th  ed.  And  the  author  expressly  includes  in  this  a  case  of 
dissolution  by  bankruptcy,  though  it  is  apparent  that  the  property  of 
a  bankrupt  concern  may  not  be  meddled  with  by  one  of  its  former 
members.  But  it  is  clear  that  the  relations  of  the  individual  mem- 
bers of  the  firm  are  not,  by  a  dissolution  thereof,  so  completely  sev- 
ered as  that  no  act  of  one  can  have  any  effect  upon  the  others. 
Bobbins  v.  Fuller,  24  N.  Y.  570.  Each  and  all  have  still  an  interest 
in  the  settlement  of  the  affairs  of  the  firm,  in  the  payment  of  its 
debts,  and  the  adjustment  of  the  liability  of  each  to  it  and  to  each 
other,  and  in  the  just  division  of  any  surplus. 

Though  the  copartnership  be  insolvent,  as  in  this  case,  and  it  be 
declared  bankrupt,  the  members  individually  may  be  solvent,  and 
liable  to  be  affected  by  the  final  result  of  the  bankrupt  proceedings. 
And  so  there  does,  after  a  dissolution,  still  continue  that  common 
interest  in  past  transactions,  and  in  the  present  and  future  legitimate 
consequences  therefrom,  as  that  a  joint  power  and  authority  in  rela- 
tion thereto  continues;  and  while,  after  dissolution,  no  member  of 
the  late  firm  can  by  his  act  create  a  new  liability  against  his  former 
copartners  (24  N.  Y.,  supra),  or  bind  them  to  an  alleged  liability 
(Hackley  v.  Patrick,  3  J.  E.  536),  or  revive  an  extinct  one  (Van 
Keuren  v.  Parmelee,  2  N.  Y.  523),  he  may  do  some  acts  which  shall 
affect  and  be  binding  upon  them,  when  such  acts  are  confined  to  mat- 
ters in  which  they  all  still  have  a  common  interest  and  are  under  a 
common  liability.  Thus  it  has  been  held  that  one  who  was  once  a 
member  of  a  dissolved  partnership  which,  in  its  lifetime,  had  in- 
dorsed a  note  in  the  firm  name,  might,  after  dissolution,  waive  demand 
of  payment  and  notice  of  non-payment.  Darling  v.  March,  22  Me. 
184 ;  which  decision  was  put  upon  the  principle  that,  though  dissolu- 
tion revoked  all  power  to  make  a  new  contract,  it  did  not  revoke  the 
authority  to  arrange  those  before  created  and  yet  subsisting.  And  it 
being  so,  that  the  act  of  one  of  former  partners,  in  relation  to  a  valid 
subsisting  liability  of  the  late  firm  does  affect  the  others,  and  is  taken 
as  their  act,  and  his  knowledge  thereof  as  their  knowledge,  there 
seems  no  reason  why  the  refusal  of  one  to  pay,  on  demand,  a  note  of 
the  partnership  should  not  be  deemed  the  refusal  of  all,  and  all  be 
chargeable  therewith.  And  then,  a  demand  of  payment  made  to  one 
is  a  demand  of  payment  made  to  all,  and  is  sufficient  upon  which  to 
give  notice  of  non-payment  to  their  indorser. 

And  further  in  aid  of  this  idea,  it  is  to  be  remembered  that  the 
contract  of  the  indorser  of  the  promissory  note  of  a  copartnership  is 


248  indorsee's  contract. 

that  he  will  pay  if  the  copartnership  does  not,  while  that  of  the  in- 
dorser  of  the  note  of  joint  makers  is  that  he  will  pay  if  neither  of 
them  does.  One  joint  maker,  not  a  partner  of  the  other,  may  not  be 
able  to  speak  for  the  other  as  to  his  ability  or  disposition  to  protect 
his  promise  and  to  save  his  indorser  from  liability,  while  one  partner, 
though  the  firm  has  been  dissolved,  is  supposed  to  know  and  care  as 
much  as  the  other  of  its  ability  and  willingness  in  those  respects. 
Again,  the  purpose  of  demand  and  notice  to  the  indorser  is  that  he, 
knowing  of  the  failure  to  pay  by  the  copartnership,  may  be  put  at 
once  on  his  guard,  to  save  himself,  if  maybe,  from  loss.  This  end 
is  achieved  when  one  of  former  partners  has  refused  to  pay,  as  when 
all  have.  Taking  all  the  reasons  for  the  distinction  made  by  the 
law  between  the  case  of  a  note  of  joint  makers  who  are  partners, 
and  of  that  of  joint  makers  who  are  not  partners,  and  all  the  reasons 
for  requiring  a  demand  of  payment  of  the  maker,  and  notice  thereof 
and  of  refusal  to  the  indorser,  in  order  to  charge  him,  we  are  of  the 
opinion  that  the  rule  that  a  demand  of  one  copartner  is  sufficient, 
applies  as  well  where  the  partnership  has  been  dissolved  as  where  it 
has  not.  It  follows  that  the  demand  of  payment  in  this  case  was  suffi- 
cient. We  find  that  this  view  is  sustained  in  brief  opinions  in  Barry 
V.  Crowley,  4  Gill,  194;  Brown  v.  Turner,  15  Ala.  832.  ... 

[A  question  of  the  notice  of  dishonor,  the  court  holding  that  it 
was  sufficient.]  The  judgment  appealed  from  should  be  affirmed,  with 
costs. 

All  concur. 

Judgment  afflrmed. 


MAGEUDER  v.  THE  UNION"  BANK  OF  GEOEGETOWN. 

Supreme  Court  of  the  United  States,  January,  1830.     3  Peters,  89. 

When  a  negotiable  instrument  has  been  dishonored,  notice  of  the  dishonor  must 
be  piven  to  an  indorser  to  charge  him  with  liability,  even  though  he  has  knowledge 
of  the  dishonor.^ 

The  case  is  stated  in  the  opinion  of  the  court. 

[Argument  not  reported.] 

Marshall,  C.  J.  This  action  was  brought  by  the  Union  Bank  of 
Georgetown  against  George  B.  Magruder,  as  indorser  of  a  promissory 
note  made  by  George  Magruder.  The  maker  of  the  note  died  before 
it  became  payable,  and  letters  of  administration  on  his  estate  were 
taken  out  by  the  indorser.  "When  the  note  became  payable,  suit  was 
commenced  against  the  indorser,  without  any  demand  of  payment 

1  N.  I.  L.  §  106. 


MAGKUDER  V.   THE   UNION   BANK   OF   GEOEGETOWN.  249 

other  than  the  suit  itself,  without  any  protest  for  non-pa3^ment,  and 
without  any  notice  that  the  note  was  not  paid,  and  that  the  holder 
looked  to  him  as  indorser  for  payment.  Upon  these  circumstances 
the  counsel  for  the  defendant  moved  the  court  to  instruct  the  jury 
that,  before  the  plaintiff  can  recover  in  this  action,  it  is  essential  for 
him  to  prove  demand  and  notice  to  the  indorser  of  the  non-payment, 
which,  not  being  done,  the  verdict  should  be  for  the  defendant.  But 
the  court  refused  to  give  this  instruction,  and  charged  the  jury  that 
no  demand  or  notice  of  non-payment  was  necessary.  To  this  opin- 
ion, the  counsel  for  the  defendant  in  the  Circuit  Court  excepted,  and 
has  brought  the  cause  to  this  court  by  writ  of  error. 

The  general  rule  that  payment  must  be  demanded  from  the  maker 
of  a  note,  and  notice  of  its  non-payment  forwarded  to  the  indorser 
within  due  time,  in  order  to  render  him  liable,  is  so  firmly  settled 
that  no  authority  need  be  cited  in  support  of  it.  The  defendant  in 
error  does  not  controvert  this  rule,  but  insists  that  this  case  does  not 
come  within  it,  because  demand  of  pajTnent  and  notice  of  non-pay- 
ment are  totally  useless,  since  the  indorser  has  become  the  personal 
representative  of  the  maker.  He  has  not,  however,  cited  any  case  in 
support  of  this  opinion,  nor  has  he  shown  that  the  principle  has  been 
ever  laid  down  in  any  treatise  on  promissory  notes  and  bills.  The 
court  ought  to  be  well  satisfied  of  the  correctness  of  the  principle, 
before  it  sanctions  so  essential  a  departure  from  established  commer- 
cial usage. 

This  suit  is  not  brought  against  George  B.  Magruder  as  adminis- 
trator of  George  Magruder,  the  maker  of  the  note,  but  against  him  as 
indorser.  These  two  characters  are  as  entirely  distinct  as  if  the  per- 
sons had  been  different.  A  recovery  against  George  B.  Magruder,  as 
indorser,  will  not  affect  the  assets  in  his  hands  as  administrator.  It 
is  not  a  judgment  against  the  maker,  but  against  the  indorser  of  the 
note.  The  fact  that  the  indorser  is  the  representative  of  the  maker 
does  not  oppose  any  obstacle  to  proceeding  in  the  regular  course. 
The  regular  demand  of  payment  may  be  made,  and  the  note  protested 
for  non-payment,  of  which  notice  may  be  given  to  him  as  indorser 
with  as  much  facility  as  if  the  indorser  had  not  been  the  administra- 
tor. It  is  not  alleged  that  any  difficulty  existed  in  proceeding  regu- 
larly; the  allegation  is  that  it  was  totally  useless. 

The  note  became  payable  on  the  8th  day  of  November,  1824.  The 
writ  was  taken  out  against  the  indorser  on  the  26th  day  of  April, 
1825.  If  this  unusual  mode  of  proceeding  can  be  sustained,  it  must 
be  on  the  principle  that,  as  the  indorser  must  have  known  that  he  had 
not  paid  the  note  as  the  representative  of  the  maker,  notice  to  him 
was  useless.  Could  this  be  admitted,  does  it  dispense  with  the  neces- 
sity of  demanding  payment?  It  is  possible  that  assets  which  might 
have  been  applied  in  satisfaction  of  this  debt,  had  payment  been  de- 
manded, may  have  received  a  different  direction.    It  is  possible  that 


250  indorser's  contract. 

the  note  may  have  been  paid  by  the  maker  before  it  fell  due.  Be  this 
as  it  may,  no  principle  is  better  settled  in  commercial  transactions 
than  that  the  undertaking  of  the  indorser  is  conditional.  If  due  dili- 
gence be  used  to  obtain  payment  from  the  maker,  without  success,  and 
notice  of  non-payment  be  given  to  him  in  time,  his  undertaking  be- 
comes absolute,  not  otherwise.  Due  diligence  to  obtain  payment 
from  the  maker  is  a  condition  precedent,  on  which  the  liability  of 
the  indorser  depends.  As  no  attempt  to  obtain  payment  from  the 
maker  was  made  in  this  case,  and  no  notice  of  non-payment  was  given 
to  the  indorser,  we  think  the  Circuit  Court  ought  to  have  given  the 
instruction  prayed  for  by  the  defendant  in  that  court. 

The  judgment  is  reversed  and  the  cause  remanded,  with  directions 
to  award  a  venire  facias  de  novo. 

Note.  —  Tn  Yates  v.  Goodwin,  96  Me.  90,  "  the  defendant  was  treasurer  of 
the  corporation  maker  of  the  note,  indorser  on  the  note,  and  administrator  of 
the  estate  of  the  owner  of  the  note.  He  was,  at  that  time,  the  person,  as  ad- 
ministrator, whose  duty  it  was  to  demand  payment  of  the  note;  he  was  the 
person,  as  treasurer,  upon  whom  demand  for  payment  should  properly  be 
made;  and  he  was  the  person,  as  indorser,  to  whom  notice  of  dishonor  should 
be  given,  that  is,  notice  of  demand  by  himself,  upon  himself,  for  j)ayment,  and 
refusal  by  himself  to  pay  himself.  On  Nov.  13,  1894,  the  defendant  wrote 
upon  the  back  of  the  note  these  words  :  '  Demand  made  for  payment  Nov. 
13,  '94.'  The  defendant  testifies  that  no  demand  was  actually  made.  But 
we  think  that  the  very  act  of  the  defendant  in  writing  these  words  may 
properly  be  regarded  as  a  demand  by  himself  as  administrator,  upon  himself 
as  treasurer.  The  various  entities  of  the  defendant  cannot  be  separated.  It 
was  his  duty  to  make  demand,  and  undoubtedly  the  writing  of  the  words  was 
to  serve  the  purpose  of  a  demand,  as  between  Goodwin,  treasurer,  and  Good- 
win, administrator.  It  was  to  be  understood  that  a  formal  demand  had  been 
made.  That  was  equivalent  to  a  formal  demand.  Moreover,  Goodwin,  in- 
dorser, was  there  also,  and  knew  of  the  demand  made.  That  was  notice. 
Notice  need  not  be  in  writing.  It  may  be  oral.  .  .  .  What  the  defendant 
knew  as  administrator  and  treasurer,  he  knew  as  indorser.  He  had  no  need 
to  give  himself  further  notice  as  indorser.  To  have  gone  through  the  form  of 
so  doing  would  have  been  silly  and  meaningless."  Opinion  of  Mr.  Justice 
Savage,  p.  92.  The  plaintiff  seems  to  have  been  an  heir  of  Bryant,  the  payee 
and  holder  of  the  note  which  Goodwin  had  indorsed  before  delivery.  (See 
N.  I.  L.  §  81.)  He  brought  suit  against  Goodwin  as  indorser,  and  the  latter 
set  up  as  a  defence  that  he  had  had  no  notice  of  dishonor.  It  was  held  that 
he  had  notice  and  was  liable. 

But  it  seems  that  he  had  notice,  not  because  he  had  knowledge  of  the  dis- 
honor, but  because  as  administrator  it  was  his  duty  to  preserve  the  rights  of 
his  intestate,  and  hence  to  demand  payment  and  notify  indorsers  of  a  dishonor  ; 
and  that  having  made  the  demand,  it  was  to  be  presumed  that  he  was  notified 
that  he  was  looked  to  for  payment  as  indorser.  He  would  not  be  heard  to 
say  that  he,  as  representative  of  the  holder,  did  not  look  to  himself  as  indorser 
for  payment. 

Ci  Lysaght  i>.  Bryant,  9  C.  B.  45,  ante,  p.  21. 


MILLS  V.   BANK  OF  THE  UNITED  STATES.         251 

MILLS    V.    BANK    OF    THE    UNITED    STATES. 

Supreme  Court  of  the  Uuited  States,  February,  1826.     11  Wheat.  431. 

The  notice  should  describe  the  instrument,  and  inform  the  indorser  of  the  fact  of 
dishonor,  and  that  he  is  looked  to  for  payment.^ 

The  case  is  stated  in  the  opinion  of  the  court. 
[Argument  not  reported.] 

Story,  J.  This  is  a  suit  originally  brought  in  the  Circuit  Court 
of  Ohio,  by  the  Bank  of  the  United  States,  against  A.  G.  Wood  and 
George  Ebert,  doing  business  under  the  firm  of  Wood  &  Ebert,  Alex- 
ander Adair,  Horace  Eeed,  and  the  plaintiff  in  error,  Peter  Mills. 
The  declaration  was  for  $3600,  money  lent  and  advanced.  During 
the  pendency  of  the  suit,  Eeed  and  Adair  died.  Mills  filed  a  separate 
plea  of  non  assumpsit,  upon  which  issue  was  joined;  and,  upon  the 
trial,  the  jury  returned  a  verdict  for  the  Bank  of  the  United  States, 
for  $4641,  upon  which  judgment  was  rendered  in  their  favor.  At  the 
trial,  a  bill  of  exceptions  was  taken  by  Mills,  for  the  consideration  of 
the  matter  of  which  the  present  writ  of  error  has  been  brought  to  this 
court. 

By  the  bill  of  exceptions,  it  appears  that  the  evidence  offered  by 
the  plaintiffs  in  support  of  the  action  "was,  by  consent  of  counsel, 
permitted  to  go  to  the  jury,  saving  all  exceptions  to  its  competence 
and  admissibility  which  the  counsel  for  the  defendant  reserved  the 
right  to  insist  [upon]  in  claiming  the  instructions  of  the  court  to  the 
jury  on  the  whole  case." 

The  plaintiffs  offered  in  evidence  a  promissory  note,  signed  Wood 
&  Ebert,  and  purporting  to  be  indorsed  in  blank  by  Peter  Mills, 
Alexander  Adair,  and  Horace  Reed,  as  successive  indorsers,  which 
note,  with  the  indorsements  thereon,  is  as  follows,  to  wit :  "  Chili- 
cothe,  20th  July,  1819.  $3600.  Sixty  days  after  date,  I  promise  to 
pay  to  Peter  Mills,  or  order,  at  the  office  of  discount  and  deposit  of 
the  Bank  of  the  United  States,  at  Chilicothe,  $3600,  for  value  re- 
ceived. Wood  &  Ebert."  Indorsed,  "  Pay  to  A.  Adair,  or  order, 
Peter  Mills."  "  Pay  to  Horace  Reed,  or  order,  A.  Adair."  "  Pay  to 
the  President,  Directors,  and  Company  of  the  Bank  of  the  United 
States,  or  order,  Horace  Reed."  On  the  upper  right-hand  corner  of 
the  note  is  also  indorsed:  "  3185.  Wood  &  Ebert,  $3600,  Sept.  18- 
21."  It  was  proven  that  this  note  had  been  sent  to  the  office  at 
Chilicothe,  to  renew  a  note  which  had  been  five  or  six  times  previ- 
ously renewed  by  the  same  parties.  It  was  proven,  by  the  deposition 
of  Levin  Belt,  Esq.,  Mayor  of  the  town  of  Chilicothe,  that,  on  the  22d 
September,  1819,  immediately  after  the  commencement  of  the  hours 

1  N.  I.  L.  §§  112,  113. 


252  inporser's  contract. 

of  business,  he  duly  presented  the  said  note  at  the  said  office  of  dis- 
count and  deposit,  and  there  demanded  payment  of  the  said  note; 
but  there  was  no  person  there  ready  or  willing  to  pay  the  same,  and 
the  said  note  was  not  paid;  in  consequence  of  which  the  said  depo- 
nent immediately  protested  the  said  note,  for  the  non-payment  and 
dishonor  thereof,  and  immediately  thereafter  prepared  a  notice  for 
each  of  the  indorsers  respectively,  and  immediately,  on  the  same  day, 
deposited  one  of  said  notices  in  the  post-office,  directed  to  Peter  Mills, 
at  Zanesville  (his  place  of  residence),  of  which  notice  the  following 
is  a  copy:  "  Chilicothe,  22d  of  September,  1819.  Sir:  You  will 
hereby  take  notice  that  a  note,  drawn  by  Wood  &  Ebert,  dated  twen- 
tieth day  of  September,  1819,  for  $3600,  payable  to  you,  or  order,  in 
sixty  da3'^s,  at  the  office  of  discount  and  deposit  of  the  Bank  of  the 
United  States  at  Chilicothe,  and  on  which  you  are  indorser,  has  been 
protested  for  non-pa}Tnent,  and  the  holders  thereof  look  to  you. 
Yours  respectfully.  Levin  Belt,  Mayor  of  Chilicothe."  (Peter  Mills, 
Esq.)  It  was  further  proven  by  the  plaintiffs  that  it  had  been  the 
custom  of  the  banks  in  Chilicothe,  for  a  long  time  previously  to  the 
establishment  of  a  branch  in  that  place,  to  make  demand  of  promis- 
sory notes  and  bills  of  exchange,  on  the  day  after  the  last  day  of  grace 
(that  is,  on  the  sixty-fourth  day)  ;  that  the  branch  bank,  on  its  estab- 
lishment at  Chilicothe,  adopted  that  custom,  and  that  such  had  been 
the  uniform  usage  in  the  several  banks  in  that  place  ever  since.  No 
evidence  was  given  of  the  handwriting  of  either  of  the  indorsers.  The 
court  charged  the  jury :  1.  That  the  notice,  being  sufficient  to  put  the 
defendant  upon  inquiry,  was  good,  in  point  of  form,  to  charge  him, 
although  it  did  not  name  the  person  who  was  holder  of  the  said  note, 
nor  state  that  a  demand  had  been  made  at  the  bank  when  the  note 
was  due ;  2.  That,  if  the  jury  find  that  there  was  no  other  note  pay- 
able in  the  office  at  Chilicothe,  drawn  by  Wood  &  Ebert,  and  in- 
dorsed by  defendant,  except  the  note  in  controversy,  the  mistake  in 
the  date  of  the  note,  made  by  the  notary  in  the  notice  given  to  that 
defendant,  does  not  impair  the  liability  of  the  said  defendant,  and 
the  plaintiffs  have  a  right  to  recover;  3.  That,  should  the  jury  find 
that  the  usage  of  banks,  and  of  the  office  of  discount  and  deposit  in 
Chilicothe,  was  to  make  demand  of  payment  and  to  protest,  and  give 
notice  on  the  sixty-fourth  day,  such  demand  and  notice  are  sufficient. 
The  counsel  on  the  part  of  the  defendant  prayed  the  court  to  in- 
struct the  jury  "  that,  before  the  common  principles  of  the  law  relat- 
ing to  the  demand  and  notice  necessary  to  charge  the  indorser  can  be 
varied  by  a  usage  and  custom  of  the  plaintiffs,  the  jury  must  be  sat- 
isfied that  the  defendant  had  personal  knowledge  of  the  usage  or  cus- 
tom at  the  time  he  indorsed  the  note;  and  also  that,  before  the 
plaintiffs  can  recover  as  the  holder  and  indorser  of  a  promissory  note, 
they  must  prove  their  title  to  the  proceeds  by  evidence  of  the  indorse- 
ments on  the  note,"  which  instructions  were  refused  by  the  court. 


MILLS   V.    BANK   OF   THE   UNITED   STATES.  253 

Upon  this  posture  of  the  case,  no  questions  arise  for  determination 
here,  except  such  as  grow  out  of  the  charge  of  the  court,  or  the  instruc- 
tions refused  on  the  prayer  of  the  defendant's  counsel.  Whether  the 
evidence  was,  in  other  respects,  sufficient  to  establish  the  joint  promise 
stated  in  the  declaration,  or  the  joint  consideration  of  money  lent, 
are  matters  not  submitted  to  us  upon  the  record,  and  were  proper  for 
argument  to  the  jury. 

The  first  point  is,  whether  the  notice  sent  to  the  defendant  at 
Chilicothe  was  sufficient  to  charge  him  as  indorser.  The  court  was 
of  opinion  that  it  was  sufficient,  if  there  was  no  other  note  payable  in 
the  office  at  Chilicothe,  drawn  by  Wood  &  Ebert,  and  indorsed  by  the 
defendant. 

It  is  contended  that  this  opinion  is  erroneous,  because  the  notice 
was  fatally  defective,  by  reason  of  its  not  stating  who  was  the  holder ; 
by  reason  of  its  misdescription  of  the  date  of  the  note ;  and  by  reason 
of  its  not  stating  that  a  demand  had  been  made  at  the  bank  when  the 
note  was  due.  The  first  objection  proceeds  upon  a  doctrine  which  is 
not  admitted  to  be  correct,  and  no  authority  is  produced  to  support 
it.  No  form  of  notice  to  an  indorser  has  been  prescribed  by  law.  The 
whole  object  of  it  is  to  inform  the  party  to  whom  it  is  sent  that  pay- 
ment has  been  refused  by  the  maker;  that  he  is  considered  liable; 
and  that  payment  is  expected  of  him.  It  is  of  no  consequence  to  the 
indorser  who  is  the  holder,  as  he  is  equally  bound  by  the  notice,  who- 
soever he  may  be ;  and  it  is  time  enough  for  him  to  ascertain  the  true 
title  of  the  holder  when  he  is  called  upon  for  payment. 

The  objection  of  misdescription  may  be  disposed  of  in  a  few  words. 
It  cannot  be  for  a  moment  maintained  that  every  variance,  however 
immaterial,  is  fatal  to  the  notice.  It  must  be  such  a  variance  as 
conveys  no  sufficient  knowledge  to  the  party  of  the  particular  note 
which  has  been  dishonored.  If  it  does  not  mislead  him,  if  it  conveys 
to  him  the  real  fact,  without  any  doubt,  the  variance  cannot  be 
material,  either  to  guard  his  rights  or  avoid  his  responsibility.  In  the 
present  case,  the  misdescription  was  merely  in  the  date.  The  sum, 
the  parties,  the  time  and  place  of  pa}Tnent,  and  the  indorsement,  were 
truly  and  accurately  described.  The  error,  too,  was  apparent  on  the 
face  of  the  notice.  The  party  was  informed  that,  on  the  22d  Sep- 
tember, a  note  indorsed  by  him,  payable  in  sixty  days,  was  protested 
for  non-payment;  and  yet  the  note  itself  was  stated  to  be  dated  on 
the  20th  of  the  same  month,  and,  of  course,  only  two  days  before. 
Under  these  circumstances  the  court  laid  down  a  rule  most  favorable 
to  the  defendant.  It  directed  the  jury  to  find  the  notice  good,  if 
there  was  no  other  note  payable  in  the  office  of  Chilicothe,  drawn  by 
Wood  &  Ebert,  and  indorsed  by  the  defendant.  If  there  was  no  other 
note,  how  could  the  mistake  of  date  possibly  mislead  the  defendant? 
If  he  had  indorsed  but  one  note  for  Wood  &  Ebert,  how  could  the 
notice  fail  to  be  full  and  unexceptionable  in  fact?  , 


254  INDORSEli's   CONTRACT. 

The  last  objection  to  the  notice  is,  that  it  docs  not  state  that  pay- 
ment was  demanded  at  the  bank  when  the  note  became  due.  It  is 
certainly  not  necessary  that  the  notice  should  contain  such  a  formal 
allegation.  It  is  sufficient  that  it  states  the  fact  of  non-payment  of 
the  note/  and  that  the  holder  looks  to  the  indorser  for  indemnity. 
"Whether  the  demand  was  duly  and  regularly  made  is  matter  of  evi- 
dence to  be  established  at  the  trial.  If  it  be  not  legally  made,  no 
averment,  however  accurate,  will  help  the  case;  and  a  statement  of 
non-payment  and  notice  is,  by  necessary  implication,  an  assertion  of 
right  by  the  holder,  founded  upon  his  having  complied  with  the 
requisitions  of  law  against  the  indorser.  In  point  of  fact,  in  commer- 
cial cities,  the  general  if  not  universal  practice  is,  not  to  state  in  the 
notice  the  mode  or  place  of  demand,  but  the  mere  naked  non-payment. 

Upon  the  point  then,  of  notice,  we  think  there  is  no  error  in  the 
opinion  of  the  Circuit  Court. 


GILBERT    V.    DENNIS. 

Supreme  Court  of  Massachusetts,  March,  1842.     3  Met.  495. 

But  mere  notice  of  non-payment,  which  does  not  express  or  imply  demand  and 
dishonor,  is  not  such  notice  as  will  render  the  indorser  liable. ^ 

Assumpsit  by  indorsee  against  the  indorser  of  a  negotiable  prom- 
issory note.  The  note  was  payable  generally.  Payment  at  maturity 
having  been  refused,  the  holder  caused  notice  to  be  left  at  the  de- 
fendant's dwelling-house,  which  stated  that  the  note  "  is  due  this  day 
and  unpaid."  Defence,  that  the  notice  was  not  good.  The  judge 
ruled  that  it  was  good,  but  reserved  the  question  for  the  whole  court. 

[Argument  not  reported.] 

Shaw,  C.  J.  .  .  .  [A  question  of  the  presentment.^]  No  particu- 
lar form  of  notice  is  necessary.  It  may  be  either  written  or  verbal. 
Tindal  v.  Brown,  1  T.  E.  167.  Nor  will  a  mistake  or  misdescription 
of  the  note  render  the  notice  insufficient,  if  on  the  whole  it  cannot 
mislead  the  indorser,  and  if  it  so  designates  and  distinguishes  the 
note  as  to  leave  no  reasonable  doubt  in  the  mind  of  the  indorser  what 
note  was  intended,  and  that  it  was  the  same  with  the  note  in  suit. 
Smith  V.  Whiting,  13  Mass.  6;  Bank  of  United  States  v.  Carneal, 
2  Peters,  543. 

But  though  no  special  form  of  notice  is  requisite,  still  in  some  form 

^  This  is  to  be  taken  in  connection  with  the  facts  before  the  court,  to  wit,  that  the 
instrument  was  payable  at  the  bank.  See  explanation  of  this  statement  in  Gilbert  v, 
Dennis. 

■^  N.  I.  L.  §  113.  «  Seepos/,  p.  306. 


GILBERT  V.   DENNIS.  255 

the  fact  to  be  notified  is  that  the  note  is  dishonored  by  the  default  of 
the  promisor;  and  this  may  be  done  verbally  or  in  writing,  in  any 
language  which  communicates  the  information  to  the  indorser,  in 
terms,  or  by  reasonable  implication.  Indeed,  the  same  formula,  in 
terms,  may  communicate  this  information  or  not,  according  to  cir- 
cumstances. Suppose  a  note  payable  at  a  bank,  in  terms,  or  by  the 
agreement  of  parties,  or  tacit  agreement  arising  from  usage  or  other- 
wise ;  it  is  the  duty  of  the  promisor  to  pay  it  at  such  bank  on  the  last 
day  of  grace.  The  dishonor  of  such  note  by  the  promisor  consists  in 
the  non-pa}'ment  at  the  bank.  If  then,  after  the  time  of  payment 
has  elapsed,  notice  be  given  to  the  indorser  that  the  note  is  unpaid, 
it  is  notice  that  it  is  dishonored ;  whereas,  in  case  of  a  private  holder, 
in  regard  to  a  note  which  requires  presentment  and  demand  to  fix 
the  holder  with  a  default,  notice,  in  the  same  words,  that  the  note  is 
unpaid  would  not  necessarily  imply  that  it  was  dishonored,  because 
that  fact  might  be  strictly  true,  though  the  note  had  never  been 
presented,  nor  presentment  waived  or  excused. 

But  whatever  may  be  the  form  of  the  notice,  whether  written  or 
verbal,  we  think  the  result  of  the  decided  cases  is  this:  that  the 
notice  should  be  such  that  it  will  inform  the  indorser  that  the  notice 
has  become  due  and  been  dishonored,  and  that  the  holder  relies  on  the 
indorser  for  payment ;  that  this  information  may  be  express,  or  may 
be  inferred  by  necessary  implication,  or  reasonable  intendment  from 
the  language;  construing  such  language  in  reference  to  its  accus- 
tomed meaning,  when  applied  to  similar  subjects,  and  with  reference 
to  the  terms  of  the  note,  the  time  and  place  at  which  the  note  is  to 
be  paid  as  fixed  by  express  or  tacit  agreement,  or  inferred  from  gen- 
eral or  particular  usages.  It  is  not  necessary  to  inform  the  indorser 
of  the  time,  place,  or  mode  of  presentment  and  demand,  nor  the 
means  by  which  it  was  dishonored,  nor  matter  of  excuse  or  waiver. 
Whatever  legally  fixes  the  promisor  with  dishonor  is  sufficient,  on 
due  notice  given,  to  charge  the  indorser.  If,  for  instance,  the  prom- 
isor had  absconded  before  the  note  is  due,  without  having  made  pro- 
vision for  its  payment,  so  that  no  presentment  and  demand  can  be 
made,  that  is  a  dishonor,  of  which  the  holder  may,  immediately  after 
the  note  has  become  due,  notify  the  indorser ;  or  if  the  promisor  has 
agreed  that  notice  left  at  a  particular  place  shall  be  deemed  a  good 
substitute,  and  notwithstanding  notice  is  so  left  he  does  not  make 
payment,  this  is  likewise  a  dishonor. 

But,  without  considering  further  what  constitutes  a  dishonor,  it 
may  be  'useful  to  examine  more  particularly,  in  reference  to  the  pres- 
ent case,  the  authorities  in  relation  to  the  effect  and  purport  of  the 
notice  to  be  given  to  an  indorser.  The  rule  is  laid  down  in  general 
terms  by  the  text-writers,  that  notice  is  to  be  given  of  the  fact  of  dis- 
honor. Bayley  states  the  duty  of  the  holder.  He  is  under  an  imnlied 
undertaking  to  every  party  to  the  bill  or  note,  who  would  be  entitled 


256  INDORSEll'S   CONTRACT. 

to  bring  an  action  on  paying  it,  to  present,  in  proper  time,  the  one 
for  acceptance  and  each  for  payment ;  to  allow  no  extra  time  for  pay- 
ment, and  to  give  notice  without  delay  to  such  person  of  a  failure 
in  the  attempt  to  procure  a  proper  acceptance  or  payment.  Bayley, 
Bills,  1st  Am.  ed.  124. 

In  general,  it  is  incumbent  on  the  holder  to  give  notice  of  the  dis- 
honor to  those  persons  to  whom  he  means  to  resort  for  payment; 
other^vise  they  will  be  discharged.    Chitty,  Bills,  393. 

In  Tindal  v.  Brown,  1  T.  R.  1G7,  and  3  T.  R.  186,  note,  it  was  held 
that  no  particular  form  of  notice  was  necessary,  but  that  such  notice 
must  come  from  the  holder  of  the  bill  or  note,  or  some  party  to  it; 
and  that  mere  knowledge  of  the  fact  of  non-payment,  coming  to  the 
indorser  from  any  other  source,  would  not  be  sufficient.  It  ought  to 
purport  that  the  holder  looks  to  him  for  payment.  The  court  do 
not  say,  in  terms,  that  the  notice  must  directly,  or  by  implication, 
state  the  fact  of  dishonor,  but  it  is  implied.  The  case  decides  that  the 
holder  must  do  an  act,  electing  to  assert  his  right  to  recover  the  note 
of  the  indorser,  which  right  can  only  exist  in  case  of  a  dishonor  of 
the  promisor.  The  case  did  not  call  for  a  decision  as  to  what  must 
be  the  tenor  or  purport  of  the  notice,  as  to  the  fact  of  dishonor.  It 
ought,  said  Mr.  Justice  Buller,  to  purport  that  the  holder  looks  to 
him  (the  indorser)  for  payment.  In  regard  to  this,  it  may  be  re- 
marked that,  when  notice  is  given  by  the  holder  to  the  indorser  of  the 
dishonor  of  a  note,  it  necessarily  implies  that  he  looks  to  him  for 
payment.  That  is  the  natural,  and  may  in  general  be  regarded  as  the 
necessary,  inference  from  the  fact  of  giving  such  notice.^ 

This  question  seems  not  to  have  arisen  in  England  until  a  recent 
period ;  but,  since  the  point  has  been  started,  there  has  been  a  series 
of  decisions  on  the  subject.  The  first  was  Hartley  v.  Case,  4  Bam. 
&  C.  339  ;  s.  c.  6  Dowl.  &  Ryl.  505.  The  notice  from  the  holder  was : 
"  I  am  desired  to  apply  to  you  for  the  payment  of  the  sum  of  £150, 
due  to  myself  on  a  draft  drawn  by  Mr.  Case  on  Mr.  Case,  which  I 
hope  you  will  on  receipt  discharge,  to  prevent  the  necessity  of  law 
proceedings,  which  otherwise  will  immediately  take  place."  The 
court  held  it  insufficient,  because  it  did  not  apprise  the  party  of  the 
fact  of  dishonor.  They  said,  the  language  used  must  be  such  as  to 
convey  notice  to  the  party  what  the  bill  is,  and  that  payment  of  it  has 
been  refused  by  the  acceptor.    This  was  in  1825. 

The  next  case  was  that  of  Solarte  v.  Palmer.  On  a  trial  before 
Lord  Tenterden,  he  expressed  an  opinion  that  the  notice  was  insuffi- 
cient. A  bill  of  exceptions  was  taken,  and  the  case  brought  before  the 
Exchequer  Chamber,  who  confirmed  the  decision.  7  Bing.  530; 
5  Moore  &  P.  475;  1  Cromp.  &  J.  417;  1  Tyr.  371.  On  appeal  to 
the  House  of  Lords,  the  judgment  was  affirmed.  8  Bligh,  N.  R. 
371,  874;  s.  c.  2  CI.  &  Fin.  93;  1  Bing.  N.  R.  194;  1  Scott,  1. 
1  See  Fitchburg  Ins.  Co.  v.  Davis,  121  Mass.  121,  post,  p.  261. 


GILBERT  V.    DENNIS.  257 

The  action  was  brought  by  the  assignees  of  a  bankrupt,  and  the 
notice  was  given  by  the  attorneys  of  the  assignees.  It  described  the 
bill,  and  stated  that  it  had  been  put  into  their  hands  by  the  assignees, 
with  directions  to  take  legal  measures  for  the  recovery  thereof,  un- 
less immediately  paid. 

In  giving  judgment  in  the  Exchequer  Chamber,  Tindal,  C.  J., 
states  the  rule  to  be,  that  the  notice  does  not  require  the  formality 
of  a  regular  protest,  but  it  should  at  least  inform  the  party  to  whom 
it  is  addressed,  either  in  express  terms  or  by  necessary  implication, 
that  the  bill  has  been  dishonored,  and  that  the  holder  looks  to  him 
for  payment.    This  was  decided  in  the  House  of  Lords,  June,  1834. 

The  next  case,  I  believe,  is  that  of  Bolton  v.  Welsh,  3  Bing.  N.  R. 
688;  s.  c.  4  Scott,  425.  The  notice  to  the  indorser  was  thus:  "  The 
promissory  note  for  £200,  drawn  by,  etc.,  dated  18th  July  last,  pay- 
able three  months  after  date,  and  indorsed  by  you,  became  due 
yesterday,  and  is  returned  to  me  unpaid.  I  therefore  give  you  notice 
thereof,  and  request  you  will  let  me  have  the  amount  thereof  forth- 
with." It  was  strongly  urged  that  the  words  returned  unpaid  would 
import  to  the  understanding  of  mercantile  men  that  the  note  had 
been  dishonored.  But  the  court  held  themselves  bound  by  the  case 
of  Solarte  v.  Palmer,  and  believing  this  case  to  be  within  it,  held 
the  notice  insufficient,  although  all  the  judges  expressed  their  regret 
at  the  result.  But  they  state  the  rule  of  law,  as  it  had  before  been 
stated,  that  the  notice  should  show  a  presentment  to  the  maker,  a 
demand  of  payment,  and  a  refusal.  As  to  anything  further  than 
the  general  rule,  this  case  is  of  no  authority,  unless  in  a  case  where 
the  form  of  notice  is  precisely  the  same.  Whether  in  such  case  the 
words  returned  unpaid  would  import  the  fact  of  dishonor  would 
depend  much  upon  the  usage  of  each  mercantile  community  in  which 
they  should  be  used,  and  the  conventional  use  and  meaning  of  par- 
ticular forms  of  expression  used  in  such  community.  This  was  a 
decision  of  the  Court  of  Common  Pleas,  Easter  Term,  1837.* 

About  the  same  time  was  decided,  in  the  Court  of ,  Exchequer,  the 
case  of  Hedger  v.  Steavenson,  2  Mees.  &  W.  799,  where  the  attorney 
addressed  a  letter  to  the  defendant,  informing  him  that  his  note 
(describing  it)  became  due  the  day  before,  and  had  been  returned 
unpaid,  and  requested  him  to  remit  the  amount,  with  Is.  6^.  not- 
ing;  and  the  notice  was  held  to  be  good. 

The  case  of  Messenger  v.  Southey,  1  Man.  &  G.  76,  and  1  Scott, 
IST.  R.  180,  was  decided  in  the  Court  of  Common  Pleas,  in  1840. 
The  notice  was  as  follows :  "  This  is  to  inform  you  that  the  bill  I 
took  of  you  for  £15  25.  6d.  is  not  took  up,  and  4s.  6d.  expense;  and 
the  money  I  must  pay  immediately."    Held,  it  was  insufficient,  be- 

1  Boultonu.  Welsh  was  overruled  in  1842  by  Robson  v.  Corlewis,  2  Q.  B.  B.  C 
Car.  &  M.  378. 

17 


258  indorsee's  contract. 

cause  it  did  not  state  or  intimate,  by  intelligible  inference,  that  the 
note  had  been  dishonored. 

About  the  same  time,  the  case  of  Lewis  v.  Gompertz,  6  Mees.  & 
W.  399,.  came  before  the  Court  of  Exchequer.  The  notice  from  the 
holder  to  the  indorser  stated  that  the  bill  bearing  his  indorsement 
had  been  presented  to  the  acceptor,  and  returned  dishonored,  "  and 
now  lies  overdue  and  unpaid  with  me,  as  above,  of  which  I  give  you 
notice."  This  was  held  sufficient,  as  giving  all  the  requisite  infor- 
mation, although  it  did  not,  in  terms,  require  payment  of  the  indorser. 

The  remarks  of  Mr.  Baron  Parke,  in  this  case,  are  well  worthy  of 
consideration,  as  showing  the  extent  to  which  the  court  considered 
the  authority  of  Solarte  v.  Palmer  as  going,  and  the  qualifications 
with  which  it  is  to  be  taken. 

In  Grugeon  v.  Smith,  6  Adol.  &  Ellis,  499,  the  notice  to  the 
drawer  of  a  bill  was  that  the  bill  had  been  returned  with  charges; 
and  the  immediate  attention  of  the  drawer  to  it  was  requested.  This 
was  held  sufficient,  as  implying  a  demand  and  refusal,  and  noting 
for  non-payment. 

See  Houlditch  v.  Cauty,  4  Bing.  N.  E.  411;  s.  c.  6  Scott,  209; 
Strange  v.  Price,  10  Adol.  &  Ellis,  125;  Burgh  v.  Legge,  5  Mees.  & 
W.  418 ;  Shelton  v.  Brothwaite,  7  Mees.  &  W.  436 ;  Coo\e  v.  French, 
3  Per.  &  D.  596;  s.  c.  10  Adol.  &  Ellis,  131,  note. 

These  are  all  recent  cases,  bearing  more  or  less  directly  upon  the 
question,  but  do  not  essentially  vary  the  result.  Where,  in  the  notice, 
it  is  stated  that  the  bill  has  been  noted  or  returned  with  charges  of 
protest,  or  the  like,  it  is  held  to  be  notice,  by  reasonable  implication 
of  the  fact  of  dishonor. 

It  was  contended  at  the  argument  that  although  it  has  been  settled 
by  recent  authorities  in  England  that  the  notice  to  the  indorser 
must  state  the  fact  of  dishonor,  yet  that  the  American  authorities 
would  show  that  it  was  unnecessary.  It  becomes,  therefore,  neces- 
sary to  examine  and  compare  them. 

Mills,  in  error,  v.  U.  S.  Bank,  11  Wheat.  431.^  The  note  was  in 
terms  payable  at  the  branch  of  the  U.  S.  Bank  at  Chilicothe,  and  in- 
dorsed by  the  original  defendant,  plaintiff  in  error.  It  was  demanded 
at  the  proper  time  at  the  bank,  but  there  being  no  person  there  ready 
and  willing  to  pay  the  same,  it  was  immediately  protested,  and  notice 
given  to  the  defendants.  The  notice  described  the  note  by  the  date 
and  amount,  the  time  and  place  of  payment,  and  as  a  note  on  which 
the  defendant  was  indorser,  and  stated  thus :  "  which  has  been  pro- 
tested for  non-payment,  and  the  holders  thereof  look  to  you.'* 
(Signed  by  the  Mayor  of  Chilicothe  acting  as  notary,  and  addressed 
to  the  defendant.)  It  was  objected  that  the  notice  was  defective, 
because  it  did  not  state  who  was  the  holder;  because  there  was  a 
misdescription  of  the  date ;  and  because  it  did  not  state  that  a  demand 

1  Ante,  p.  251. 


GILBERT  V.   DENNIS.  259 

had  been  made  at  the  bank,  when  the  note  was  due.  As  to  the  mis- 
description, it  was  held  to  be  of  no  importance,  if  there  was  no  other 
note  to  which  it  could  apply,  if  it  was  so  described  as  to  indicate  the 
note  in  suit,  and  if  it  did  not  mislead. 

As  to  the  sufficiency  of  the  notice,  the  opinion  was  delivered  by 
Mr.  Justice  Story.  Some  particular  expressions,  taken  alone,  would 
seem  to  warrant  the  position  for  which  it  is  cited.  But  taking  the 
whole  together,  and  in  reference  to  the  case  then  before  the  court, 
we  think  it  is  not  opposed  to  the  rule  as  stated  in  the  English  cases. 
Speaking  in  reference  to  the  first  objection,  that  the  notice  did  not 
state  who  was  the  holder,  the  judge  says :  "  No  form  of  notice  to 
an  indorser  has  been  prescribed  by  law.  The  whole  object  of  it  is 
to  inform  the  party  to  whom  it  is  sent  that  payment  has  been  refused 
by  the  maker;  that  he  is  considered  liable;  and  that  payment  is 
expected  of  him." 

In  reference  to  the  objection  that  it  did  not  state  that  payment  was 
demanded  at  the  bank  when  the  note  became  due,  he  says :  "  It  is 
certainly  not  necessary  that  the  notice  should  contain  such  a  formal 
allegation.  It  is  sufficient  that  it  states  the  fact  of  non-payment 
of  the  note,  and  that  the  holder  looks  to  the  indorser  for  indemnity." 
He  then  speaks  of  the  fact  of  presentment  and  demand  as  matter 
of  fact  to  be  proved,  and  adds :  "  A  statement  of  non-payment  and 
notice  is,  by  necessary  implication,  an  assertion  of  right  by  the  holder, 
founded  on  his  having  complied  with  the  requisitions  of  law  against 
the  indorser."  One  of  these  requisitions  is,  of  course,  presentment 
and  demand.  And  the  learned  judge  concludes,  upon  this  point, 
by  adding  that,  "  in  point  of  fact,  the  general  if  not  universal 
practice  is,  not  to  state  in  the  notice  the  mode  or  place  of  demand, 
but  the  mere  naked  non-payment." 

In  the  case  then  before  the  court,  the  notice  contained  a  full  and 
precise  statement  of  the  presentment,  demand,  and  non-payment 
by  the  maker.  The  objection  with  which  the  court  were  dealing  was, 
that  the  notice  did  not  specify  the  time  and  place  of  demand.  The 
answer  made  was,  that  such  particularity  was  unnecessary,  and  that 
it  is  sufficient  that  it  states  the  fact  of  non-payment.  Applied  to  the 
facts  of  that  case,  it  may  be  construed  to  mean  non-payment  after 
due  presentment.  So,  when  the  learned  judge  speaks  of  the  practice 
of  commercial  cities,  he  speaks  of  notice  of  the  mere  naked  non- 
payment, in  contradistinction  to  stating,  in  the  notice,  the  mode  and 
place  of  demand.  That  such  is  the  meaning  may  be  inferred  from 
the  passage  before  cited,  in  which  he  speaks  of  the  object  of  the 
notice,  which  is  to  inform  the  indorser  that  payment  has  been  refused 
by  the  maker.  Eefusal  implies  non-payment  on  demand,  or  under 
such  circumstances  as  render  a  presentment  and  demand  unnecessary. 
Indeed,  in  many  cases,  simple  notice  of  non-payment  is  notice  of 
dishonor ;  as  where  the  note  is  in  terms,  or  by  usage  or  special  agree- 


260  INDORSE Il'S   CONTRACT. 

ment,  payable  at  a  bank,  a  notice  stating  the  date  and  terms  of  the 
note,  showing  that  it  has  become  due,  and  averring  that  it  is  unpaid, 
is  equivalent  to  an  averment  that  it  is  dishonored. 

In  Smith  v.  Whiting,  12  Mass.  6,  no  question  was  raised  as  to 
the  sufficiency  of  the  notice.  It  was  notice  from  a  bank.  It  de- 
scribed the  note  as  due  and  unpaid ;  and  by  usage  it  was  held  to  be 
payable  at  the  bank.  Of  course  it  was  dishonored,  by  not  being  paid 
at  the  bank  by  the  maker. 

So  in  State  Bank  v.  Hurd,  13  Mass.  172,  notice  was  left  at  a  place 
agreed  by  the  parties  as  a  substitute  for  notice  at  the  house  or  place 
of  business  of  the  maker ;  and  it  was  held  sufficient,  being  equivalent 
to  a  more  formal  demand;  and  failure  of  the  promisor  to  pay,  on 
such  notice,  rendered  the  indorser  liable. 

The  case  of  Bank  of  Eochester  v.  Gould,  9  "Wend.  279,  is  a  case 
of  mere  misdescription.  The  notice  to  the  indorser  stated  expressly 
that  the  note  had  been  protested  for  non-payment;  and  the  only 
question  was,  whether  it  was  well  described.  It  therefore  does  not 
affect  the  present  question. 

We  have  thus  attempted,  at  the  risk  of  being  somewhat  tedious, 
to  ascertain  what  is  the  rule  upon  this  subject,  on  account  of  the 
extreme  importance  of  certainty  and  uniformity  in  the  rules  of  law 
applicable  to  the  rights  and  duties  of  holders  and  other  parties  to 
notes  and  bills  of  exchange.  And  we  take  that  rule  to  be,  that  as 
an  indorser  is  liable  only  conditionally  for  the  payment,  in  case  of 
a  dishonor  of  the  note  at  its  maturity  by  the  maker  and  notice 
thereof  to  the  indorser,  in  order  to  charge  him,  notice  of  such  dis- 
honor must  be  given  him  by  the  holder  or  his  agent,  or  some  party 
to  the  bill;  that  mere  notice  of  non-payment,  which  does  not  ex- 
press or  imply  notice  of  dishonor,  is  not  such  notice  as  will  render 
the  indorser  liable. 

In  order  to  apply  the  rule  thus  stated  to  the  present  case,  it  will 
be  necessary  to  look  at  the  facts  stated  in  the  report.  It  appears  that 
the  presentment  and  demand  on  the  promisor  were  made  on  the 
morning  of  the  day  on  which  the  note  fell  due.  Afterwards,  at  about 
eleven  o'clock,  the  plaintiff  caused  a  written  notice  to  be  left  at  the 
defendant's  dwelling-house,  of  which  the  following  is  a  copy :  "  Bos- 
ton, May  4,  1838.  Mr.  Louis  Dennis.  Sir,  —  I  have  a  note  signed 
by  C.  E.  Bowers  and  indorsed  by  you  for  seven  hundred  dollars, 
which  is  due  this  day  and  unpaid;  payment  is  demanded  of  you. 
C.  C.  Gilbert." 

This  notice  comes  from  an  individual,  not  from  a  bank.  It  was 
delivered  at  eleven  a.  m.  There  would  then  be  no  default  and  no 
dishonor,  unless  a  demand  had  been  made  on  the  promisor.  An 
averment,  therefore,  that  it  was  unpaid  did  not,  by  necessary  impli- 
cation or  reasonable  intendment,  amount  to  an  averment  or  inti- 


% 

FITCHBURG   INSURANCE   COMPANY   V.   DAVIS.  261 

mation  that  payment  had  been  demanded  and  refused,  or  that  the 
note  had  been  otherwise  dishonored.  The  court  are  therefore  of 
opinion  that  the  notice  was  not  sufficient  to  render  the  indorser 
legally  liable. 


FITCHBUEG    IXSUEANCE    COMPANY   v.    DAVIS. 

Supreme  Court  of  Massachusetts,  October,  1876.     121  Mass.  121. 

If,  however,  the  notice  is  given  by  the  holder,  it  is  unnecessary  that  it  contain  a 
statement  that  the  indorser  is  looked  to  for  payment ;  such  fact  would  be  implied  from 
the  giving  of  the  notice.^ 

Contract  to  recover  an  instalment  of  $50,  due  May  30,  1874, 
and  interest,  against  the  indorser  of  the  following  promissory  note, 
signed  by  Honora  May  and  William  May:  "$1035.20.  Fitchburg, 
November  30th,  1869.  For  value  received  I  promise  to  pay  John 
E.  Davis,  or  his  order,  one  thousand  and  thirty-five  dollars  and  twenty 
cents  as  follows,  to  wit:  fifty  dollars  at  the  expiration  of  three 
months  from  the  date  hereof,  and  fifty  dollars  at  the  expiration  of 
each  and  every  three  months  thereafter  until  the  whole  sum  of  ten 
hundred  and  thirty-five  dollars  and  twenty  cents  is  paid,  with  inter- 
est on  the  whole  sum,  at  the  rate  of  seven  per  cent,  payable  semi- 
annually." Trial  in  the  Superior  Court,  before  Putnam,  J.,  without 
a  jury,  who  allowed  a  bill  of  exceptions  in  substance  as  follows : 

The  making  of  the  note  and  of  the  indorsement  were  admitted. 
It  appeared  in  evidence  that  a  demand  was  made  upon  the  makers 
for  the  payment  of  the  said  instalment,  and  notice  of  its  non-payment 
seasonably  given  to  the  defendant  on  June  2,  1874.  This  demand, 
however,  was  for  the  payment  of  said  instalment,  and  interest  then 
due  upon  the  said  note  (some  of  the  previous  instalments  and  interest 
not  having  been  paid),  and  the  notice  given  to  the  defendant  stated 
that  such  had  been  the  demand,  and  that  the  holders  looked  to  him 
for  the  payment  of  said  instalment  and  the  interest  due  upon  the  note. 
The  defendant  had  never  been  legally  notified  of  the  non-payment 
of  such  previous  instalments. 

The  defendant  contended  that  the  whole  notice  was  invalidated 
by  reason  of  its  including  notice  of  a  demand  for  more  than  the 
indorser  was  liable  to  pay;  but  the  judge  ruled  that  as  the  makers 
were  liable  for  the  whole,  the  demand  was  good,  and  that  the  notice 
was  not  wholly  invalidated  by  reason  of  the  demand  covering  more 
than  the  indorser  was  legally  liable  to  pay,  and  found  that  the  indor- 
ser was  properly  notified. 

It  appeared  in  evidence  that  previous  instalments  and  the  in- 
terest upon  the  note,  according  to  its  terms,  had  not  been  paid 
1  See  Furze  v.  Sharwood,  2  Q.  B.  388. 


262  indorser's  contract. 

except  as  by  the  indorsement  of  the  proceeds  of  the  sale  of  property, 
as  hereinafter  stated ;  that  no  notice  of  their  non-payment  was  given 
to  the  defendant  until,  and  except  the  notice  of  June  2,  1874,  being 
the  notice  hereinbefore  referred  to,  and  the  defendant  contended 
that  such  want  of  notice  for  so  long  a  period  —  the  plaintiff  holding 
collateral  security  —  was,  under  the  circumstances,  such  a  dishonor 
of  the  note  and  the  instalment  sued  for  as  would  discharge  him  as 
indorser ;  but  the  judge  ruled  that  the  defendant  was  not  discharged 
thereby,  so  far  as  the  amount  of  the  instalment  sued  for  and  in- 
terest due  thereon  were  concerned. 

It  appeared  that  the  makers  of  the  note  had  given  to  the  defend- 
ant, at  the  time  of  the  making  thereof,  a  mortgage  of  land,  to  secure 
its  payment,  and  that  the  defendant  had  assigned  this  mortgage 
to  the  plaintiff,  on  May  2,  1870,  at  the  time  when  he  transferred 
to  it  the  note. 

On  April  24,  1874,  the  real  estate  was  sold  at  public  auction,  by 
virtue  of  a  power  of  sale  in  the  mortgage,  and  for  a  breach  of  the 
condition  thereof,  for  the  sum  of  $995,  and,  after  deducting  the 
charges  and  expenses  of  the  sale,  the  net  amount  of  $970  was  indorsed 
upon  said  note  on  May  2,  1874,  and  applied  towards  the  payment  of 
all  of  said  note  then  due  and  unpaid.  This  application  left  the 
instalment  now  sued  on  still  due  and  unpaid.  The  defendant  con- 
tended that  this  application  was  illegal  and  that  the  plaintiff  had 
no  right  to  appropriate  it  in  such  a  way  as  to  cover  instalments  the 
non-payment  of  which  he  had  not  been  notified  of;  but  the  judge 
ruled  otherwise,  and  found  for  the  plaintiff,  in  the  sum  of  $54.25, 
being  the  instalment  sued  for  and  interest  from  June  2,  1874;  and 
the  defendant  alleged  exceptions. 

[Argument  not  reported.] 

Gray,  C.  J.  By  the  non-payment  of  the  previous  instalments 
as  they  fell  due,  the  whole  note  was  dishonored,  and  subjected  to  all 
the  defences  which  existed  against  it  when  the  holder  took  it.  Vin- 
ton V.  King,  4  Allen,  562.^  But  the  omission  to  give  the  indorser 
notice  of  the  non-payment  of  those  instalments  does  not  affect  his 
liability  for  a  later  instalment,  of  the  non-payment  of  which  he  has 
been  duly  notified. 

Notice  that  payment  has  been  demanded  of  and  refused  by  the 
maker  is  sufficient  to  charge  the  indorser,  without  any  express 
demand  upon  him.  Lewis  v.  Gompertz,  6  M.  &  W.  399 ;  King  v. 
Bickley,  2  Q.  B.  419;  United  States  Bank  v.  Cameal,  2  Pet.  543. 
The  demand  made  in  this  case  upon  the  makers  for  the  payment  of 
the  instalment  now  sued  for,  and  of  the  interest  then  due  upon  the 
note    (some   of   the  previous   instalments   and   interest  being   still 

1  Ante,  p.  239. 


CHAPMAN   V.    KEANE.  263 

unpaid),  included  nothing  for  which  the  makers  were  not  liable. 
The  notice  to  the  indorser  of  that  demand  upon  the  makers,  and 
of  their  non-payment,  was  sufficient  to  charge  the  indorser,  and  was 
not  invalidated  by  adding  that  the  holder  looked  to  him  for  the  pay- 
ment of  this  instalment  and  of  the  interest  due  upon  the  note.  The 
indorser  was  certainly  liable  for  the  instalment  in  question,  and  for 
interest  upon  so  much  of  the  principal  as  had  not  yet  become  due; 
and  whether  he  was  liable  for  the  whole  interest  is  immaterial. 

"The  plaintiff  had  the  right  to  apply,  to  the  payment  of  the  pre- 
vious instalments,  the  proceeds  of  the  mortgage  given  by  the  maker 
to  secure  the  payment  of  the  note.  Blackstone  Bank  v.  Hill,  10 
Pick.  129,  133;  Saunders  v.  McCarthy,  8  Allen,  42;  Draper  v. 
Mann,  117  Mass.  439. 

Exceptions  overruled. 


CHAPMAN    V.    KEANE. 

King's  Bench  of  England,  Easter,  1835.     3  Ad.  &  E.  193. 

The  notice  may  be  given  by  the  holder,  or  by  any  party  to  the  instrument,  whose 
liability  has  been  duly  fixed ;  and  who,  on  taking  up  the  instrument  would  have  a 
right  of  reimbursemelit  thereon  against  the  party  notified.^  Notice  given  by  a  party 
entitled  to  give  it,  enures  for  the  benefit  of  the  holder.^ 

Assumpsit  by  indorsee  against  drawer  of  a  bill  of  exchange, 
averring  in  the  usual  form  presentment  to  the  drawee,  non-payment 
by  him,  and  notice  to  the  defendant.  Plea,  that  the  defendant  had 
not  due  notice  of  non-payment  by  the  drawee,  tendering  issue  thereon. 
Joinder. 

On  the  trial  before  Tindal,  C.  J.,  at  the  Guildford  Summer 
assizes,  1834,  it  appeared  that  the  plaintiff  had  indorsed  the  bill, 
before  it  was  due,  to  one  Wiltshire,  who  left  it  with  the  plaintiff's 
clerk  in  order  that  it  might  be  presented  at  maturity  to  the  drawee. 
It  was  dishonored  upon  presentment;  whereupon  the  plaintiff's 
clerk  gave  notice  to  the  defendant.  The  notice  was  regular  in  all 
respects  except  that  the  clerk  gave  it  in  the  name  of  the  plaintiff, 
the  indorsee,  and  not  of  Wiltshire.  The  plaintiff  afterwards  took 
up  the  bill  from  Wiltshire.  It  was  objected  that  the  notice  ought 
to  have  been  given  by  the  holder  of  the  bill,  whereas  the  holder,  at 
the  time  of  the  notice,  was  Wiltshire.  His  lordship,  being  of  the  same 
opinion,  nonsuited  the  plantiff.  In  Michaelmas  term  last,  Law  ob- 
tained a  rule  to  show  cause  why  the  nonsuit  should  not  be  set  aside 
and  a  verdict  entered  for  the  plaintiff. 

[Argument  reported.]  s^o-^f^"^  'f^V 

1  N.  I.  L.  §  107.  2  Id.  §  1 10,  cf.  §  109. 


264  indorsee's  contract. 

Lord  Denman,  C.  J.  On  the  trial  of  this  action  hy  the  indorser 
against  the  drawer  of  a  bill  of  exchange  the  Lord  Chief  Justice  of 
the  Common  Pleas  directed  a  nonsuit,  for  want  of  due  notice  of 
dishonor.  The  bill  had  been  indorsed  by  the  plaintiff,  by  the  desire 
of  Wiltshire,  who  had  discounted  it  and  left  it  in  the  hands  of  the 
plaintiff's  clerk  with  instructions  to  obtain  payment  or  give  notice 
of  dishonor.  He  did  give  notice  to  the  defendant,  but  in  the  name 
of  the  plaintiff,  not  in  that  of  Wiltshire,  the  then  holder,  who  had 
deposited  the  bill  with  him. 

The  objection  to  the  plaintiff's  recovery  was  founded  on  the  case 
of  Tindal  v.  Brown,  1  T.  E.  167,  s.  c.  2  T.  E.  186,  in  which  all  the 
Judges  except  Lord  Mansfield  considered  a  notice  by  one  who  was 
not  the  holder  as  no  notice,  on  the  ground  that  the  drawer  was  not 
thereby  appraised  of  the  holder's  intention  to  look  to  him  for  pay- 
ment; and  this  case  was  distinctly  recognized,  and  its  principle 
adopted,  by  Lord  Eldon  in  Ex  parte  Barclay,  7  Ves.  597. 

Notwithstanding  these  high  authorities,  it  is  clear  from  Jameson 
V.  Swinton,  2  Camp.  373,  Wilson  v.  Swabey,  1  Stark.  34,  and  also, 
from  the  learned  treatises  on  bills  of  exchange,  that  the  contrary 
doctrine  has  prevailed  in  the  profession,  and  we  must  presume  a 
contrary  practice  in  the  commercial  world.  It  is  universally  con- 
sidered that  the  party  entitled  as  holder  to  sue  upon  the  bill  may 
avail  himself  of  notice  given  in  due  time  by  any  party  to  it.  In  the 
nisi  prius  cases  just  referred  to  no  express  allusion  was  made  to 
Tindal  v.  Brown  or  Ex  parte  Barclay ;  but  we  can  hardly  conceive 
that  they  were  not  present  to  the  recollection  of  Lord  Ellenborough 
and  Mr.  Justice  Lawrence  or  the  counsel  engaged.  These  learned 
judges,  indeed,  decided  them  at  nisi  prius,  but  without  question. 
We  are  now  compelled  to  determine  whether  the  case  of  Tindal  v. 
Brown,  as  to  this  point,  be  good  law.  We  think  that  it  is  not.  If 
it  were,  the  holder  might  secure  his  own  right  against  his  immediate 
indorser  by  regular  notice;  but  the  latter,  and  every  other  party  to 
the  bill,  would  be  deprived  of  all  remedy  against  anterior  indorsers 
and  the  drawer,  unless  each  of  those  parties  should  in  succession 
take  up  the  bill  immediately  on  receiving  notice  of  dishonor,  a  sup- 
position which  cannot  be  reasonably  made.  •  We  may  add  that  this 
point  was  not  necessary  for  the  decision  of  the  case,  as  this  court, 
including  Lord  Mansfield,  granted  a  new  trial  on  a  different  ground. 

Bule  absolute. 

Note.  —  At  the  time  when  this  case  was  decided,  the  principal  controversy 
seems  to  have  been,  whether  notice  could  be  given  by  any  one  other  than  the 
holder  or  his  agent.  The  decision  in  Chapman  v.  Keane  was  that  it  could  be 
given  by  any  party  to  the  instrument;  the  question  whether  it  was  necessary 
that  the  liability  of  such  party  should  be  fixed  before  he  became  entitled  to 
give  notice  was  not  adverted  to  by  the  court  or  by  counsel.  It  is  settled, 
however,  that  notice  can  be  given  only  by  one  whose  liability  is  fixed,  other 


BANK   OF   THE   UNITED   STATES   V.   DAVIS.  265 

than  the  holder.  Lysaght  v.  Bryant,  9  C.  B.  45  ;  Bigelow,  Bills  and  Notes,  143, 
114;  Harrison  v.  Roscoe,  15  M.  &  W.  231;  N.  I.  L.  §§  107,  110;  Tindal  v. 
Brown,  supra. 


/ 


BANK   OF   THE   UNITED    STATES   v.   DAVIS. 
Supreme  Court  of  New  York,  May,  1842.     2  Hill,  451. 


Or,  the  notice  may  be  given  by  an  agent,i  who  may  notify  the  prior  parties,  or  he 
may  give  notice  to  his  principal,  who  will  have  the  same  time  in  which  to  forward 
uotice,  as  if  his  agent  were  an  independent  holder."'^ 

Assumpsit  by  the  holder  against  the  drawer  and  iridorsers  of 
three  bills  of  exchange,  drawn  by  Davis  upon  and  accepted  by  one 
Holden,  and  indorsed  by  the  other  defendants.  The  bills  were  payable 
at  the  Merchants'  Bank  in  the  city  of  New  York. 

The  bills  were  indorsed  for  collection  by  the  cashier  of  the  plain- 
tiff bank  and  transmitted  to  a  notary  in  New  York,  who,  upon  the 
day  of  maturity,  presented  them  at  the  Merchants'  Bank  for  payment, 
and,  payment  being  refused,  protested  them  and  mailed  notices  of 
dishonor,  addressed  to  the  drawer  and  indorsers,  enclosed  in  an 
envelope  and  directed  to  the  cashier  of  the  plaintiff  bank.  The 
cashier  received  the  notices  in  due  course  of  mail,  and  immediately 
forwarded  the  notices  to  the  drawer  and  indorsers. 

The  defendants  contended  that  they  were  not  liable  for  want  of 
proper  notice  of  dishonor;  but  the  court  ruled  that  the  notice,  if 
given  as  stated  above  was  sufficient  to  entitle  the  plaintiff  to  recover. 
The  defendant  excepted  to  this  ruling. 

[Argument  not  reported.] 

Nelson,  C.  J.  The  certificates  of  the  notary  were  properly  re- 
ceived as  evidence  of  demand  and  protest  of  the  first  two  bills ;  and, 
under  our  statutes,  Sess.  Laws  of  1833,  p.  395,  §  8,  see^also  2  E.  S. 
212,  §  46,  2d  ed.,  I  am  inclined  to  think  they  were  also  evidence  of 
notice  to  the  cashier  of  the  bank  at  Erie,  the  last  indorser  upon  the 
paper. 

The  act  referred  to  allows  such  proof  of  the  service  of  notice  upon 
any  or  all  of  the  parties  to  the  bill  or  note,  the  certificate  specifying 
the  mode  of  giving  it.  The  only  doubt  upon  the  point  is,  whether 
the  cashier  of  the  bank  at  Erie,  having  indorsed  the  paper  simply 
for  the  purpose  of  collection,  should  be  regarded  as  a  party,  within 
the  meaning  of  the  statute.  The  case  is  directly  within  its  terms, 
as  the  indorsement  is  in  the  usual  way,  and,  it  may  fairly  be  pre- 
sumed, was  made  in  behalf  of  the  bank  for  the  purpose  of  indicating 

1  N.  I.  L.  §  108.  2  Id.  §  111. 


266  indorsee's  contract. 

to  its  correspondent  in  New  York  the  expectation  that  notice  should 
be  sent  to  it  in  that  character.  I  think  the  face  of  the  paper  should 
be  allowed  to  govern  the  question,  rather  than  the  particular  charac- 
ter that  may  be  given  to  it,  as  between  the  parties,  by  extrinsic 
evidence.  Every  exception  made  to  a  general  commercial  rule  con- 
cerning negotiable  paper,  which  enters  so  extensively  into  the  busi- 
ness transactions  of  the  country,  is  calculated  to  embarrass  its 
circulation,  and  endanger  its  security  and  usefulness.  This  con- 
struction will  in  no  respect  operate  to  the  prejudice  of  any  party 
liable  upon  the  paper,  whether  drawer  or  indorser,  as  will  be  seen 
upon  a  further  examination  of  the  law. 

It  is  perfectly  clear,  where  a  bill  or  note  is  sent  by  the  holder  to 
his  agent  for  him  to  receive  payment,  and  he  gives  due  notice  to 
the  principal  of  its  dishonor,  that  prompt  notice  from  the  latter  will 
be  in  time  to  charge  the  prior  parties;  though  if  it  had  been  sent 
directly  by  the  agent,  the  notice  would  have  reached  there  much 
sooner.  Chitty  on  Bills,  520,  1,  9th  Am.  from  8th  Lond.  ed. ; 
Bayley  on  Bills,  174.  The  case  of  Mead  v.  Engs,  5  Cowen,  303,  is 
a  clear  authority  for  this  doctrine,  and  comes  fully  up  to  the  case 
under  consideration,  and  to  the  view  we  have  taken  of  the  statute. 
There,  the  holder  in  New  York  sent  the  bill  to  a  bank  at  Providence 
for  collection,  whence  it  was  sent  to  another  bank  at  Bristol  (R.  I.), 
where  the  acceptor  resided.  The  notary  there,  after  making  demand 
and  protest,  returned  the  bill  to  the  cashier  of  the  Bristol  Bank, 
who  sent  it  by  the  next  mail  to  the  cashier  of  the  Providence  Bank, 
and  the  latter  sent  it  by  the  next  mail  to  his  immediate  indorser 
in  New  York.  The  objection  was  taken,  that  the  notary  should  have 
given  notice  of  non-payment  directly  to  all  the  prior  parties;  but 
the  court  held  it  to  have  been  given  according  to  established  com- 
mercial usage.  It  was  also  decided  in  that  case,  that  one  to  whom 
a  bill  or  note  is  indorsed  merely  as  agent  to  collect,  is  a  holder  for 
the  purpose  of  giving  and  receiving  notice  of  non-payment;  and  is 
not  bound  to  give  notice  directly  to  all  the  prior  parties,  but  may 
content  himself  by  notifying  his  immediate  indorser,  who  is  bound 
to  give  notice  to  his  indorser,  etc.  in  the  same  manner  as  if  the 
bill  or  note  had  been  negotiated  to  the  agent  for  a  valuable  con- 
sideration. Upon  this  view  of  the  case,  therefore,  the  cashier 
of  the  Erie  bank  is  to  be  regarded  as  a  party  to  the  paper  for  all 
purposes  of  receiving  and  giving  notice  to  charge  the  prior  parties; 
and  if  so,  not  only  have  the  proper  steps  been  taken  to  charge  the 
defendants,  but  the  case  is  directly  within  the  act  of  1833,  which 
makes  the  certificate  evidence  of  the  notice  given  by  the  notary. 

New  trial  granted. 


SHOENBERGER   V.   THE   LANCASTER    SAVINGS   INSTITUTION.      267 

SHOENBERGEE    v.    THE    LANCASTER    SAVINGS 
INSTITUTION. 

Supreme  Court  of  Pennsylvania,  1857.     28  Penn.  St.  459. 

If  at  maturity  the  indorser  is  dead,  notice  may  be  given  to  his  personal  repre- 
sentative.^ 

Action  upon  several  negotiable  promissory  notes  indorsed  by  the 
defendants'  testator.  The  defendants  were  named  (with  others) 
as  executors  in  the  testator's  will,  but  did  not  qualify  or  act  as  such. 
After  the  present  action,  but  not  before,  they  renounced  (the  others 
having  qualified  under)  the  appointment  made  by  tlie  testator.  The 
notes  were  dishonored  at  maturity  and  two  of  the  defendants  were 
in  due  season  notified  of  the  fact.  Judgment  for  the  plaintiffs. 
Writ  of  error,  on  the  ground  that  the  notice  of  dishonor  to  the 
defendants  was  insufficient  to  bind  the  testator's  estate. 

[Argument  reported.] 

LowRiE,  J.  The  office  of  executor  in  Pennsylvania  is  of  course 
very  analogous  to  the  office  of  executor  in  England,  but  their  duties 
are  not  identical;  and  we  always  run  the  risk  of  error  if  we  take 
counsel  from  English  analogies  and  overlook  the  instructions  of  our 
own  statutes.  At  death  a  man's  estate  really  passes  into  the  hands 
of  the  law  for  administration,  as  much  when  he  dies  testate  as  when 
intestate;  except  that,  in  the  former  case,  he  fixes  the  law  of  its 
distribution  after  payment  of  debts,  and  usually  appoints  the  per- 
sons who  are  to  execute  his  will.  But  even  this  appointment  is  only 
provisional,  and  requires  to  be  approved  by  the  law  before  it  is  com- 
plete; and  therefore  the  title  to  the  office  of  executor  is  derived 
rather  from  the  law  than  from  the  will. 

The  law,  however,  allows  a  man  to  appoint  his  executors  subject 
to  this  approval,  and  treats  them,  when  appointed,  as  entitled  to  the 
office  until  they  renounce  it,  if  they  are  not  legally  incompetent  to 
fill  it.  If  they  are  competent,  their  appointment  avails  to  make  them 
representatives  of  the  estate  so  far  as  relates  to  acts  in  which  they 
are  merely  passive,  such  as  receiving  notice  of  the  dishonor  of  a  note ; 
for  they  have  inmiediate  power  to  qualify  themselves  to  act  if  they 
choose,  and  if  the  occasion  demands  it. 

When  the  notices  in  this  case  were  served,  the  two  persons  named 
as  executors  and  to  whom  notice  was  given,  had  power  to  take  the 
oath  and  the  office  of  executors,  and  might  have  done  so  the  next  hour 
afterwards.  The  law  allowed  the  testator  to  appoint  them,  and  he 
did  so,  and  they  may  be  treated  as  representing  his  estate  for  the 
purpose  of  such  notice,  unless  they  renounced  at  the  register's  office, 

1  N.  I.  L.  §  115. 


263  INDORSEU'S   COJCTRACT. 

or  at  least  until  they  refuse  the  notice  on  the  ground  that  they  do 
not  intend  to  serve.  He  who  is  bound  to  give  such  notice  is  not  in 
fault  in  giving  it  to  one  who  is  thus  potentially  an  executor,  even 
though  others  have  already  become  so  actually  by  taking  the  oath 
of  office,  unless  at  least  he  is  warned  that  such  notice  is  not  accepted. 
If  the  estate  suffers  from  such  a  notice,  it  is  not  the  fault  of  him 
that  gave  it. 

It  was  not  erroneous  to  give  the  notice  on  the  4th  of  July,  for  a 
statute  expressly  allows  this. 

Judgment  affirmed. 


MUNN   V.   BALDWIN". 

Supreme  Court  of  Massachusetts,  March,  1810.     6  Mass.  315. 

The  notice  may  be  sent  personally  or  by  niail.^  In  the  latter  case,  by  custom, 
notice  is  deemed  to  have  been  given  when  the  notice  is  duly  addressed,  and  deposited 
in  the  post-office.^ 

Assumpsit  upon  a  bill  of  exchange  drawn  in  Boston  on  Justin 
Smith,  of  Philadelphia,  in  favor  of  the  defendants,  and  by  them 
indorsed  to  the  plaintiff. 

The  facts  (agreed)  were,  that  the  notary  in  Philadelphia,  who 
protested  the  bill  for  non-payment,  on  the  day  of  the  protest,  or 
on  the  morning  of  the  next  day,  before  the  mail  for  Boston  was  closed, 
put  a  letter  into  the  post-office  in  Philadelphia  directed  to  the  de- 
fendants in  Boston,  and  containing  the  necessary  notice ;  but  the  case 
adds :  "  It  does  not  appear  that  the  defendants  ever  received  that 
letter." 

[Argument  reported.] 

Parsons,  C.  J.  The  only  question  in  this  action  is,  whether 
the  defendants  had  legal  notice  of  the  protest  for  non-payment  of 
the  bill  of  exchange.  After  taking  a  little  time  to  advise,  we  are 
all  of  opinion  that  the  notice  is  prima  facie  sufficient.  The  holder 
of  the  bill  made  use  of  the  usual  mode  of  conveying  notice,  by  putting 
the  letter  containing  it  into  the  post-office;  and  a  mode  to  which 
the  indorsers  must  be  considered  as  assenting,  or  the  negotiating  of 
bills  payable  at  a  distance  would  be  greatly  embarrassed,  if  not 
obstructed.  For  who  would  buy  a  bill,  to  be  presented  for  payment 
in  a  remote  part  of  the  United  States,  if  it  was  to  be  understood 
that  if  not  paid,  he  must  be  at  the  expense  of  some  private  mes- 
senger, whose  accidental  sickness  or  detention  on  the  road  would 
defeat  his  remedy? 

1  N.  I.  L.  §  113.  s  Id.  §§  122,  12.1. 


BANK   OF  ALEXANDRIA  V.   SWANN.  269 

When  a  letter  is  put  into  the  regular  post-oflSce,  we  presume  that 
it  was  sent  and  received  agreeably  to  its  direction,  unless  the  contrary 
is  proved.  Here  there  is  no  evidence  on  that  point;  the  case  only 
stating,  that  it  does  not  appear  that  the  letter  was  received  by  the 
defendants ;  and  yet  they  might,  in  fact,  have  received  it.  If  it  was 
agreed  that  the  letter  miscarried,  and  that  the  defendants  did  not 
receive  it,  it  might  be  a  question  at  whose  risk  the  letter  was  sent  by 
the  mail;  and  whether,  the  regular  mail  being  the  method  of  con- 
veyance assented  to  by  the  defendants,  they  must  not  be  answerable 
for  the  miscarriage,  in  the  same  manner  as  if  a  letter  sent  by  their 
private  servant  had  not  been  delivered  by  him.  On  this  last  point, 
however,  it  is  not  necessary  now  to  decide.  But  on  the  facts  stated, 
we  are  satisfied  that  the  notice  must  be  considered  as  sufficient  to 
make  the  indorsers  liable,  and  that  the  plaintiff  ought  to  recover. 

Therefore,  conformably  to  the  agreement  of  the  parties,  let  the 
defendants  be  called. 


BAITK   OF   ALEXANDEIA   v.    SWAXN. 
Supreme  Court  of  the  United  States,  January,  1835.     9  Peters,  33. 

Where  the  person  giving  and  the  person  to  receive  notice  reside  in  different 
places,  the  notice  must  be  deposited  in  the  post-office  in  time  to  be  sent  by  mail  on 
the  day  suficeeding  that  of  dishonor.^ 

The  case  is  stated  in  the  opinion  of  the  court. 

[Argument  not  reported.] 

Thompson,  J.  This  suit  was  brought  in  the  Circuit  Court  of 
the  District  of  Columbia,  for  the  County  of  Alexandria,  upon  a 
promissory  note  made  by  Humphrey  Peake,  and  indorsed  by  the 
defendant  in  error.  Upon  the  trial  the  jury  found  a  special  verdict, 
upon  which  the  court  gave  judgment  for  the  defendant,  and  the  case 
comes  here  upon  a  writ  of  error. 

The  points  upon  which  the  decision  of  the  case  turns  resolve 
themselves  into  two  questions: 

li  "Whether  notice  of  the  dishonor  of  the  note  was  given  to  the 
indorser  in  due  time; 

2.  WTiether  such  notice  contained  the  requisite  certainty  in  the 
description  of  the  note. 

The  note  bears  date  on  the  twenty-third  day  of  June,  1829,  and 
is  for  the  sum  of  $1400,  payable  sixty  days  after  date  at  the  Bank 
of  Alexandria.    The  last  day  of  grace  expired  on  the  25th  of  August, 

1  N.  I.  L.  §  121.  Cf.  §  120,  aa  to  time  of  sending  notice  when  the  parties  reside  in 
the  same  place. 


270  indorser's  contract. 

and  on  that  day  the  note  was  duly  presented,  and  demand  of  payment 
made  at  the  bank,  and  protested  for  non-payment;  and  on  the  next 
day  notice  thereof  was  sent  by  mail  to  the  indorser,  who  resided  in 
the  city  of  Washington. 

The  general  rule,  as  laid  down  by  this  court  in  Lenox  v.  Roberts, 
2  "UTieat.  373,  4  Cond.  163,  is,  that  the  demand  of  payment  should 
be  made  on  the  last  day  of  grace,  and  notice  of  the  default  of  the 
malvcr  be  put  into  the  post-office  early  enough  to  be  sent  by  the  mail 
of  the  succeeding  day.  The  special  verdict  in  the  present  case  finds, 
that  according  to  the  course  of  the  mail  from  Alexandria  to  the  city 
of  Washington,  all  letters  put  into  the  mail  before  half-past  eight 
o'clock  P.M.,  at  Alexandria,  would  leave  there  some  time  during  that 
night,  and  would  be  deliverable  at  Washington  the  next  day,  at  any 
time  after  eight  o'clock  a.m.,  and  it  is  argued  on  the  part  of  the  de- 
fendant in  error,  that  as  demand  of  payment  was  made  before  three 
o'clock  P.M.,  notice  of  the  non-pa3'ment  of  the  note  should  have  been 
put  into  the  post-office  on  the  same  day  it  was  dishonored,  early 
enough  to  have  gone  with  the  mail  of  that  evening.  The  law  does 
not  require  the  utmost  possible  diligence  in  the  holder  in  giving 
notice  of  the  dishonor  of  the  note;  all  that  is  required  is  ordinary 
reasonable  diligence:  and  what  shall  constitute  reasonable  diligence 
ought  to  be  regulated  with  a  view  to  practical  convenience,  and  the 
usual  course  of  business.  In  the  case  of  the  Bank  of  Columbia  v. 
Lawrence,  1  Peters,  578,  583,  it  is  said  by  this  court  to  be  well 
settled  at  this  day,  that  when  the  facts  are  ascertained,  and  are 
undisputed,  what  shall  constitute  due  diligence  is  a  question  of  law; 
that  this  is  best  calculated  for  the  establishment  of  fixed  and  uniform 
rules  on  the  subject,  and  is  highly  important  for  the  safety  of  holders 
of  commercial  paper.  The  law,  generally  speaking,  does  not  regard 
the  fractions  of  a  day;  and,  although  the  demand  of  payment  at 
the  bank  was  required  to  be  made  during  banking  hours,  it  would 
be  unreasonable,  and  against  what  the  special  verdict  finds  to  have 
been  the  usage  of  the  bank  at  that  time,  to  require  notice  of  non- 
payment to  be  sent  to  the  indorser  on  the  same  day.  This  usage  of 
the  bank  corresponds  with  the  rule  of  law  on  the  subject.  If  the 
time  of  sending  the  notice  is  limited  to  a  fractional  part  of  a  da^, 
it  is  well  observed  by  Chief  Justice  Hosmer,  in  the  case  of  the  Hart- 
ford Bank  v.  Stedman  &  Gordon,  3  Conn.  489,  495,  that  it  will 
always  come  to  a  question,  how  swiftly  the  notice  can  be  conveyed. 
We  think,  therefore,  that  the  notice  sent  by  the  mail,  the  next 
day  after  the  dishonor  of  the  note,  was  in  due  time. 


LAWSON  V.   THE   FARMERS*   BANK   OF   SALEM.  271 

LAWSON"    V.    THE    FARMEES'    BANK    OF    SALEM. 

Supreme  Court  of  Ohio,  January,  1853.     1  Ohio  St.  206. 

Though,  if  there  is  no  mail  on  the  day  succeeding  dishonor,  or  if  the  mail  on  such 
day  be  made  up  and  closed  before  business  hours,  it  will  be  sufficient  to  send  notice 
on  the  next  mail  thereafter  ^  Every  iudorser  has  the  same  time  after  receiving 
notice,  in  which  to  send  it,  that  the  holder  has'.^ 

Error  to  the  Court  of  Common  Pleas  of  Columbiana  County, 
reserved  in  the  District  Court  for  decision  by  the  Supreme  Court. 

The  original  action  was  assumpsit  for  recovery  against  Lawson 
&  Covode,  as  indorsers  of  a  bill  of  exchange  in  the  following  form: 
"Waterville,  April  25,  1848,  $4000.  Ninety  days  after  date,  pay 
to  the  order  of  Lawson  &  Covode  four  thousand  dollars,  value  re- 
ceived, and  place  the  same  to  the  account  of  yours,  etc.,  W.  F.  Jordan. 
To  J.  Jordan  &  Son,  Pittsburgh."  Indorsed :  "  Pay  to  Farmers' 
Bank  of  Salem.  Lawson  &  Covode."  Accepted  bv  "  J.  Jordan  & 
Son." 

The  declaration  counts  upon  the  instrument,  and  also  contains  the 
common  counts.    Plea,  non  assumpsit. 

It  appears  that  this  bill,  which  was  drawn  and  indorsed  in  this 
State,  was  discounted  by  the  Bank  of  Salem,  and  the  money  paid 
to  the  acceptors  thereof.  Subsequently  it  was  indorsed  by  the  Bank 
of  Salem  to  the  Exchange  Bank  of  Pittsburgh  for  collection,  Jordan 
&  Son  living  in  that  city.  It  matured  in  the  hands  of  the  Exchange 
Bank  of  Pittsburgh  on  the  twenty-seventh  day  of  July,  1848,  and 
being  dishonored  by  the  acceptors  in  Pittsburgh  was  protested  for 
non-payment  by  a  notary. 

On  the  trial  of  the  cause  in  the  Common  Pleas,  the  bank  gave  the 
bill  in  evidence,  and  the  protest  attached  thereto,  dated  July  27, 
1848,  also  a  certified  copy  of  the  notarial  record  of  the  notary,  with 
proof  of  his  death  since  the  protest  of  the  bill.  The  defendants 
below  objected  to  this  last  testimony,  but  the  court  admitted  it.  Dur- 
ing the  trial  the  bank  called  J  B  and  J  D  as  witnesses,  both  being 
stock-holders  and  directors  of  the  Salem  Bank  not  only  at  that  time 
but  also  when  the  bill  was  discounted  and  reached  its  maturity. 
Their  testimony  was  objected  to,  but  received. 

The  bank  having  rested,  the  defendants  below  gave  in  evidence  the 
notice  of  protest  sent  to  the  Salem  Bank  by  the  notary,  and  produced 
by  the  cashier  of  the  Salem  Bank.  And  evidence  having  been  given 
that  the  Exchange  .Bank  of  Pittsburgh  closed  at  three  o'clock  p.m. 
on  the  27th  July,  1848 ;  that  the  notary's  office  was  about  one 
square  from  the  Pittsburgh  post-office ;  that  the  mail  left  Pittsburgh 
for  Salem  at  ten  o'clock  a.  m.  on  the  28th  of  July,  and  was  closed 
at  ten  minutes  after  nine  o'clock  a.  m.  ;   and  that  the  business  hours 

1  N.  I.  L.  §  121.  2  Id.  §  124. 


272  indorser's  contract. 

of  Pittsburgh  were  from  seven  o'clock  a.  m,  till  dusk,  —  the  parties 
rested.  The  notarial  protest  docs  not  state  when  the  notices  were 
deposited  in  the  post-office ;  but  the  notice  to  the  Salem  Bank,  which 
covered  the  notice  to  Lawson  and  Covode,  the  accommodation  in- 
dorsers,  is  mail-marked  at  the  Pittsburgh  post-office,  July  29,  1848. 

Instructions  to  the  jury  were  objected  to  by  the  defendants,  and 
the  jury  returned  a  verdict  for  the  plaintiff  for  $4513.33. 

[Argument  not  reported.] 

Bartley,  J.,  (after  considering  the  question  of  the  competency 
of  the  witnesses,  J  B  and  J  D).  Touching  the  second  question, 
then,  did  the  Court  of  Common  Pleas  err  in  charging  the  jury 
that,  if  the  notice  to  the  indorsers  of  the  demand  and  non-payment 
of  the  bill  was  deposited  in  the  post-office  at  Pittsburgh  at  any  time 
during  the  day  after  the  day  of  dishonor,  without  regard  to  the  time 
of  the  departure  of  the  mail  for  that  day,  it  would  be  sufficient  notice ; 
and,  moreover,  that  if  it  was  found  inconvenient  to  deposit  the  notice 
in  the  post-office  in  time  for  the  mail  of  that  day,  it  was  in  proper 
time  if  the  notice  was  deposited  in  time  to  be  sent  off  by  the  next 
mail  of  the  day  next  after  the  day  following  the  day  of  the  dishonor 
of  the  bill? 

This  involves  a  very  important  question  of  the  law  merchant,  and 
it  is  not  a  little  surprising  that  there  should  remain  any  doubt  or 
uncertainty,  at  this  late  day,  upon  a  question  of  such  vital  importance 
to  the  interest  of  commercial  countries,  respecting  the  duties  and 
liabilities  of  holders  and  parties  to  dishonored  paper.  And  it  is 
a  matter  of  no  small  moment,  that  a  question  which  enters  so  largely 
as  does  this  into  the  every-day  business  transactions  of  different 
commercial  states  and  countries  should  be  settled,  not  only  upon  a 
certain  and  unvarying,  but  also  upon  a  uniform  basis. 

The  liability  of  the  indorser  is  strictly  conditional,  dependent  both 
upon  due  demand  of  pa3nDaent  upon  the  maker  or  acceptor,  and  also 
due  and  legal  notice  of  the  non-payment.  The  purpose  and  object 
of  such  demand  and  notice  is  to  enable  the  indorser  to  look  to  his 
own  interest,  and  take  immediate  measures  for  his  indemnity.  The 
demand  and  notice  being  conditions  precedent  to  the  indorser's  lia- 
bility, it  is  incumbent  on  the  holder  to  make  clear  and  satisfactory 
proof  of  them  before  he  can  recover.  The  plaintiffs  in  error  in  this 
case,  being  accommodation  indorsers,  may  well  insist  upon  strict 
proof  of  due  diligence  in  giving  notice  of  the  dishonor  of  the  bill. 

The  law  does  not  require  the  utmost  diligence  in  the  holder,  in 
giving  notice  of  the  dishonor  of  a  bill  or  note.  All  that  is  requisite 
is  ordinary  or  reasonable  diligence.  And  this  is  not  only  the  rule  and 
requirement  of  the  law  merchant,  but  a  statutory  provision  of  this 
State.    But  what  amounts  to  due  diligence  or  reasonable  notice  is, 


LAWSON  V.    THE   FARMERS'   BANK   OF  SALEM.  273 

when  the  facts  are  ascertained,  purel}^  a  question  of  law,  settled 
"  with  a  view  to  practical  convenience,  and  the  usual  course  of 
business." 

The  question  was  at  one  time  strenuously  contested,  whether  due 
diligence  did  not  require  that,  where  the  parties  reside  in  the  same 
place,  the  notice  of  non-payment  should  be  given  on  the  day  of  the 
dishonor  of  the  bill ;  and  where  the  parties  reside  in  different  places, 
should  be  sent  by  the  mail  of  that  day,  or  the  first  possible  or  prac- 
ticable mail  after  the  default.  Tindal  v.  Brown,  1  T.  R.  167 ;  Darbi- 
shire  v.  Parker,  6  East,  3 ;  Marius,  Bills,  24.  But  the  rule  was 
established  and  is  supported  by  the  great  weight  of  authority,  that, 
where  the  parties  reside  in  different  places,  and  the  post  is  the  mode 
of  conveyance  adopted,  although  it  was  in  no  case  necessary  to  send 
the  notice  by  the  post  of  the  same  day  of  the  dishonor,  or  of  the 
knowledge  of  the  dishonor,  —  the  holder  being  entitled  to  the  whole 
of  that  day,  being  the  day  of  the  dishonor,  or  knowledge  of  the  dis- 
honor, to  prepare  his  notice,  —  yet  that  the  notice  would  be  insufii-  " 
cient  unless  put  into  the  post-office  in  time  to  go  by  the  next  mail 
after  that  day.  And  this  is  in  conformity  with  the  rule  laid  down  by 
Mr.  Chitty  in  his  learned  treatise  on  Bills  of  Exchange,  in  the  fol- 
lowing explicit  language:  ''When  the  parties  do  not  reside  in  the 
same  place,  and  the  notice  is  to  be  sent  by  general  post,  then  the 
holder  or  party  to  give  the  notice  must  take  care  to  forward  notice  by 
the  post  of  the  next  day  after  the  dishonor,  or  after  he  receives  notice 
of  such  dishonor,  whether  that  post  sets  off  from  the  place  where  he 
is  early  or  late;  and  if  there  be  no  post  on  such  next  day,  then  he 
must  send  off  notice  by  the  very  next  post  that  occurs  after  that 
day."     Chitty,  Bills,  485. 

This  is  in  accordance  with  the  rule  as  settled  by  the  Supreme  Court 
of  the  United  States.  In  Lenox  v.  Eoberts,  2  ^\nieat.  373,  Chief 
Justice  Marshall  says :  "  It  is  the  opinion  of  the  court  that  notice  of 
the  default  of  the  maker  should  be  put  into  the  post-office  early 
enough  to  be  sent  by  the  mail  of  the  day  succeeding  the  last  day  of 
grace."  And  in  the  case  of  the  Bank  of  Alexandria  v.  Swann,  9 
Peters,  33,  Mr.  Justice  Thompson  approved  of  the  general  rule  laid 
down  in  the  case  of  Lenox  v.  Eoberts,  holding  that  notice  of  the  dis- 
honor need  not  be  forwarded  on  the  last  day  of  grace,  but  should  be 
sent  by  the  mail  of  the  next  day  after  the  dishonor. 

The  same  rule  was  adopted  by  Mr.  Justice  Washington  in  the  case 
of  the  United  States  v.  Parker's  Administrators,  4  "Wash.  465 ;  and 
in  which  case  subsequently  that  decision  was  affirmed  on  error  by  the 
Supreme  Court,  12  Wheat.  559.  The  same  rule  received  the  sanc- 
tion of  Mr.  Justice  Story,  in  the  case  of  the  Seventh  Ward  Bank  v. 
Hanrick,  2  Story,  416,  although,  in  the  case  of  Mitchell  v.  Degrand, 
1  Mason,  180,  he  appears  to  have  been  disposed  to  even  greater  strict- 
ness, holding  that  when  a  bill  is  once  dishonored,  the  holder  is  bound 

18 


274  indorsee's  contract. 

to  give  notice  by  the  next  practicable  mail,  to  the  parties  whom  he 
means  to  charge  for  the  default.  This,  however,  is  explained  by  Mr. 
Justice  Washington  in  the  case  of  United  States  v.  Parker's  Admin- 
istrators, to  mean  that  the  notice  should  be  put  into  the  office  in  time 
to  be  sent  by  the  mail  of  the  succeeding  day.  This  rule,  adopted  by 
the  Supreme  Court  of  the  United  States,  and  which  is  supported  by 
the  great  weight  of  authority  in  England  and  in  the  several  States 
of  the  Union  in  which  the  question  appears  to  have  been  settled  by 
reported  adjudications,  is  subject  to  some  qualification,  relaxing  its 
rigor.  If  two  mails  leave  the  same  day  on  the  route  to  the  place  of 
the  residence  of  the  indorser,  it  is  sufficient  to  deposit  the  notice  in 
the  post-office  in  time  to  go  by  either  mail  of  that  day,  inasmuch 
as  the  fractions  of  the  day  are  not  counted.  Whitewell  v.  Johnson, 
17  Mass.  449,  454;  Howard  v.  Ives,  1  Hill  (N.  Y.),  263. 

And  for  the  reason  that  the  mail  of  the  day  succeeding  the  day  of 
the  default  may  go  out  in  some  places  soon  after  midnight  or  at  a 
very  early  hour  in  the  morning,  and  is  sometimes  made  up  and  closed 
the  evening  preceding,  it  has  been  adjudged  that,  inasmuch  as  the 
holder  is  allowed  till  the  day  after  the  day  of  default  to  send  off 
the  notice,  reasonable  diligence  would  not  require  him  to  deposit  the 
notice  in  the  post-office  at  an  unreasonably  early  hour,  or  before  a 
reasonable  time  can  be  had  for  depositing  the  notice  in  the  post- 
office  after  early  business  hours  of  that  day.  The  rule,  as  qualified 
and  settled  by  the  late  authorities,  and  which  I  take  to  be  the  correct 
one,  is  that  where  the  parties  reside  in  the  same  place  or  city,  the 
notice  may  be  given  on  the  day  of  default;  but  if  given  at  any  time  I 
before  the  expiration  of  the  day  thereafter,  it  will  be  sufficient ;  and  | 
when  the  parties  reside  in  different  places  or  States,  the  notice  may 
be  sent  by  the  mail  of  the  day  of  the  default;  but  if  not,  it  must  be 
deposited  in  the  office  in  time  for  the  mail  of  the  next  day,  provided 
the  mail  of  that  day  be  not  made  up  and  closed  at  an  unreasonably 
early  hour.  If,  however,  the  mail  of  that  day  be  closed  before  a 
reasonable  time  after  early  business  hours,  or  if  there  be  no  mail  sent 
out  on  that  day,  then  it  must  be  deposited  in  time  for  the  next  pos- 
sible post.  In  the  case  of  Downs  v.  The  Planters'  Bank,  1  Sra.  &  M. 
261,  and  also  the  case  of  Chick  v.  Pillsbury,  24  Me.  458,  the  doctrine 
on  this  subject  has  been  more  fully  examined  than  perhaps  in  any 
of  the  older  cases;  and  the  rule  adopted  is  that  the  notice,  in  order 
to  charge  the  indorser  living  in  another  place  or  State,  must  be  de- 
posited in  the  post-office  in  time  to  be  sent  by  the  mail  of  the  day 
succeeding  the  day  of  the  dishonor,  providing  the  mail  of  that  day 
be  not  closed  at  an  unreasonable  early  hour,  or  before  early  and  con- 
venient business  hours.  And  this  rule  is  well  sustained  by  authority. 
Fullerton  et  al.  v.  The  Bank  of  the  United  States,  1  Peters,  605,  618 ; 
Eagle  Bank  v.  Chapin,  3  Pick.  180,  183 ;  Talbot  v.  Clark,  8  Pick.  51; 
Carter  v.  Burley,  9  N.  H.  559,  570 ;  Farmers'  Bank  of  Maryland  v. 


LAWSON   V.   THE   FARMERS'   BANK   OF   SALEM.  275 

Duvall,  7  Gill  &  Johns.  79 ;  Freeman's  Bank  v.  Perkins,  18  Me.  292  ; 
Mead  v.  Engs,  5  Cowen,  303 ;  Sewall  v.  Eussell,  3  Wend.  276 ;  Brown 
V.  Ferguson,  4  Leigh,  37;  Dodge  v.  Bank  of  Kentucky,  2  Marshall, 
610;  Hickman  v.  Eyan,  5  Littell,  24;  Hartford  Bank  v.  Steedman, 
3  Conn.  489;  Brenzer  v.  Wightman,  7  Watts  &  S.  264;  Townsley  v. 
Springer,  1  La.  122;  Bank  of  Natchez  v.  King,  3  Robinson,  243; 
Brown  v.  Turner,  1  Ala.  752 ;  Lockwood  v.  Crawford,  18  Conn.  361, 
363;  Bayley,  Bills,  262;  Story,  Promissory  Notes,  §  325;  and  Byles, 
Bills,  160. 

Some  obscurity^  and  uncertainty  have  been  created  on  this  subject 
by  the  expression  used  in  some  of  the  cases,  and  by  some  of  the  ele- 
mentary writers,  that  the  holder  or  person  giving  the  notice  has  "  one 
day  "  or  "  an  entire  day  "  in  which  to  give  the  notice  after  the  day 
of  the  dishonor.  The  term  "  one  day  "  or  "  an  entire  day  "  seems 
not  to  have  been  used  always  in  the  same  sense;  and  the  confusion 
appears  to  have,  in  part,  arisen  from  the  fact  that,  where  the  parties 
reside  in  the  same  place,  notice  at  any  time  before  the  expiration  of 
the  day  after  the  day  of  the  default  will  be  sufficient,  while,  where 
the  parties  reside  in  different  places,  the  notice  must  frequently  be 
mailed  early  in  the  day  to  be  in  time  for  the  mail  of  that  day. 

The  defendant  in  error  relies  upon  the  doctrine  laid  down  in  the 
elementary  works  of  Chancellor  Kent  and  Mr.  Justice  Story,  as  fully 
sustaining  the  charge  of  the  court  below.  Inasmuch  as  precision  and 
certainty  in  the  settlement  of  this  rule  are  of  very  great  importance, 
a  careful  examination  of  the  subject  seems  to  be  required. 

[After  discussing  the  statement  of  the  rule  in  3  Kent's  Com.  106, 
and  Story  on  Bills  of  Exchange,  §§  290,  291,  382  and  288,  the  court 
proceeds :] 

The  statement  of  the  rule  in  the  last  extract  is  consistent  with  the 
doctrine  established  by  the  Supreme  Court  of  the  United  States,  and 
fully  sustained  by  authority. 

The  discrepancies  which  have  arisen  on  this  subject  appear  to  have 
grown  out  of  an  inaccurate  use,  in  some  of  the  books  and  decisions, 
of  the  terms  "  his  day,"  "  an  entire  day,"  and  "  a  whole  day,"  etc., 
these  phrases  being  at  one  time  understood  or  taken  literally,  and  at 
another  time  to  mean  a  space  of  time  equal  to  a  full  day.  If  these 
phrases  are  to  be  taken  to  mean  the  duration  of  a  full  day,  instead  of 
the  day  itself,  in  their  general  application,  the  effect  would  be  to 
change  and  break  down  numerous  well-settled  and  useful  rules.  The 
law,  as  a  general  thing,  does  not  have  regard  to  the  fractions  of  a 
day,  and  thus  compel  parties  to  resort  to  nice  questions  of  the  suffi- 
ciency of  a  certain  number  of  hours  or  minutes,  and  to  the  taking  of 
the  parts  of  two  different  days  to  make  up  what  may  be  considered  in 
one  sense  a  daj^  because  equal  in  duration  to  one  entire  day.  If  this 
were  the  case,  the  indorser,  after  having  been  notified,  would  often  be 
unable  to  determine  whether  he  had  been  notified  in  season  or  not, 


276  indorsee's  contract. 

until  he  had  learned  the  hour  of  the  day  when  the  default  occurred ; 
and  the  holder  would  have  it  in  his  power  at  times  of  affecting  in- 
juriously the  right  of  the  indorser  to  an  early  notice,  by  delaying  the 
presentment  until  a  late  hour  in  the  day.  Nothing  more  could  have 
been  intended  by  the  use  of  these  phrases  than  that  each  party  should 
have  a  specified  day  upon  which  the  act  enjoined  upon  him  should 
be  performed.  This  is  the  sense  in  which  Lord  Ellenborough  used  it 
in  the  case  of  Smith  v.  Mullett,  2  Camp.  208,  when  he  said :  "  If  a 
party  has  an  entire  day,  he  must  send  off  his  letter  conveying  the 
notice  within  post-time  of  that  day."  And,  it  is  said  by  a  learned 
elementary  authority,  "  If  a  party  has  an  entire  day,  he  must  send 
off  his  letter  conveying  the  notice  of  the  dishonor  of  the  bill  within 
post-time  of  that  day."    Byles,  Bills,  161. 

The  rule  laid  down  in  Smith's  Mercantile  Law,  to  which  the  de- 
fendant in  error  has  referred,  will  not,  as  I  apprehend,  be  found  on 
close  examination  to  be  at  variance  with  the  doctrine  here  adopted. 
Smith's  Mercantile  Law,  310. 

It  is  claimed,  on  behalf  of  the  plaintiffs  in  error  in  this  case,  that 
the  notice  of  the  dishonor  of  the  bill  should  have  been  sent  immedi- 
ately to  them,  instead  of  being  sent,  as  it  was  in  the  first  place,  to  the 
Bank  of  Salem.  The  holder  is  not  bound  to  give  notice  of  the  dis- 
honor to  any  more  than  his  immediate  indorser ;  and  each  party  to  a 
bill  has  the  same  time  after  notice  to  himself  for  giving  notice  to  other 
parties  beyond  him  that  was  allowed  to  the  holder  after  the  default.^ 
Sheldon  v.  Benham,  4  Hill  (N,  Y.),  129;  Eagle  Bank  v.  Hathaway, 
5  Met.  213.  And  when  a  bill  is  sent  to  an  agent  for  collection,  the 
agent  is  required  simply  to  give  notice  of  the  dishonor  in  due  time 
to  his  principal ;  and  the  principal  then  has  the  same  time  for  giving 
notice  to  the  indorsers  after  such  notice  from  his  agent  as  if  he  had 
been  himself  an  indorser,  receiving  notice  from  a  holder.  Bank  of 
the  United  States  v.  Davis,  2  Hill  (N.  Y.),  452;  ^  Church  v.  Barlow, 
9  Pick.  647.  The  party  in  this  case,  therefore,  was  not  at  fault  by 
sending  the  notice  directly  to  the  Bank  of  Salem,  leaving  that  bank 
to  send  the  notice  to  the  plaintiffs  in  error. 

Applying  the  rule,  therefore,  which  we  have  adopted  as  the  correct 
one,  to  this  case,  it  was  incumbent  on  the  plaintiff  below,  in  order  to 
be  entitled  to  a  recovery,  to  show  that  the  notice  of  the  dishonor  of 
the  bill  was  deposited  in  the  post-office  in  Pittsburgh  in  time  to  be 
sent  by  the  mail  of  the  twenty-eighth  day  of  July.  Ten  minutes  past 
nine  o'clock  in  the  morning  was  not  an  unreasonably  early  hour,  or 
before  a  reasonable  and  convenient  time  after  the  commencement  of 
early  business  hours  of  the  day.  The  neglect,  therefore,  to  send  the 
notice  by  the  mail  of  the  next  day  after  the  day  of  the  default  oper- 
ated to  discharge  the  plaintiffs  in  error  as  indorsers,  unless  from  some 
other  cause  notice  had  been  dispensed  with  or  rendered  unnecessary. 

1  N.  I.  L.  §  124.  2  j^nte^  p.  265. 


WALKER   V.   STETSON".  277 

And  for  the  charge  of  the  Court  of  Common  Pleas  to  the  jury  to  the 
contrary,  the  judgment  is  reversed,  and  the  cause  remanded  for 
further  proceedings. 

Judgment  of  Common  Pleas  reversed. 


WALKEE   V.    STETSON". 

Supreme  Court  of  Ohio,  December,  1862.     14  Ohio  State,  89. 

In  the  absence  of  any  designated  place,  notice  must  be  sent  to  the  indorser's  place 
of  business  or  abode,  if,  by  the  exercise  of  reasonable  diligence,  either  can  be  found.^ 

Action  by  the  holder  against  the  indorser  of  certain  bills  of  ex- 
change. Judgment  for  the  plaintiff.  Writ  of  error  on  instructions 
to  the  jury.    The  facts  appear  in  the  opinion. 

[Argument  reported.] 

Eanney,  J.  The  bills  of  exchange  upon  which  this  action  was 
brought  were  drawn  and  indorsed  by  the  plaintiff  in  error.  His 
liability  upon  them  was  conditional,  and  his  obligation  to  pay  them 
depended  upon  their  being  duly  dishonored,  and  legal  notice  of  such 
dishonor;  unless,  indeed,  he  had  waived  such  diligence  on  the  part 
of  the  holder.  The  bills  were  legally  dishonored  and  properly  pro- 
tested, and  notices  for  all  the  parties  conditionally  liable  were  in  due 
time  forwarded  to  the  defendant  in  error,  a  subsequent  indorser  of 
the  bills.  The  right  to  recover  was  placed  upon  two  grounds:  1. 
That  the  defendant  in  error  had,  on  the  day  he  received  these  notices, 
forwarded  by  mail  those  directed  to  the  plaintiff  in  error,  to  his  place 
of  business  at  Chicago;  and,  2.  That  a  few  days  thereafter,  in  a  per- 
sonal interview  with  the  defendant  in  error,  he  had  recognized  his 
liability  as  still  existing,  and  had  expressly  promised  to  pay  the  bills. 
The  verdict  of  the  jury  may  have  been  founded  upon  the  ground  last 
stated,  but,  as  there  was  a  conflict  in  the  evidence  upon  it,  there  is 
nothing  in  the  record  to  show  that  it  was ;  and  we  are,  consequently, 
compelled  to  examine  the  facts  applicable  to  the  first  ground,  and  the 
instructions  of  the  court  based  upon  that  state  of  facts. 

Stating  these  facts  as  broadly  as  anything  in  the  evidence  will  war- 
rant, they  amounted  to  this :  The  plaintiff  in  error  was  a  resident  of 
Morristown,  ISTew  Jersey,  and  had  no  fixed  residence  in  the  State  of 
Ohio,  or  at  Chicago,  but  during  most  of  the  season  of  1856  had  been 
engaged  in  the  lumber  business,  staying  at  Cleveland,  and  in  Ottawa 
County,  where  he  owned  a  saw-mill ;  that  about  the  1st  of  November 
he  left  Cleveland,  and,  before  doing  so,  informed  the  defendant  in 

1  N.  I.  L.  §  125. 


278  indorsf-r's  contract. 

error  that  he  was  going  to  Chicago  to  dispose  of  a  quantity  of  lumber 
which  he  was  about  shipping  to  that  place,  and  should  return  from 
there  to  Cleveland;  and  had  not  returned  when  the  notices  were 
mailed  to  him  at  Chicago  on  the  22d  of  that  month,  —  that  being 
the  very  day  upon  which  they  were  received  by  the  defendant  in  error 
from  the  notary  in  New  York.  In  point  of  fact,  the  plaintiff  in  error 
was  in  Chicago  when  the  notices  were  mailed  to  him,  but  probably 
left  there  before  they  arrived,  and  shortly  after  was  in  Cleveland, 
where  he  was  met  by  the  defendant  in  error,  and  fully  informed  of 
all  that  had  transpired. 

Upon  this  state  of  the  facts,  counsel  for  the  plaintiff  in  error  re- 
quested the  court  to  charge  the  jury :  "  That  if  the  defendant's  resi- 
dence was  not  in  Chicago,  or  he  was  not  engaged  in  any  permanent 
business  there,  but  was  there  temporarily,  and  for  a  temporary  pur- 
pose only,  the  sending  to  him,  at  Chicago,  notices  of  the  protest  of 
said  bills  of  exchange  would  not  be,  unless  the  defendant  actually 
received  them,  due  diligence,  and  sufficient  to  charge  the  defendant 
with  the  payment  of  said  bills." 

To  which  the  court  responded  as  follows :  "  That  if  the  defendant 
did  not  reside  in  Chicago,  and  was  not  engaged  in  any  permanent 
business  there,  but  was  there  for  a  purpose  merely  temporary,  sending 
notices  of  protest  to  him  at  Chicago  would  not,  as  a  proposition  of 
law,  constitute  due  diligence  sufficient  to  charge  the  defendant.  But 
if  the  defendant  had  gone  to  Chicago  on  business  which  would  detain 
him  an  indefinite  period  of  time,  and  might  occupy  him  there  during 
the  remainder  of  the  season  of  navigation  on  the  lakes,  that  might  be 
the  proper  place  to  send  the  notices  to  him ;  and  it  was  a  question  of 
fact  for  the  jury  to  find,  referring  to  all  the  testimony  on  that  ques- 
tion, whether  the  business  of  the  defendant  at  Chicago  was  of  that 
character,  or  whether  the  plaintiff  had  sufficient  reason  from  his 
information  derived  from  the  defendant,  or  from  his  own  knowledge 
of  the  defendant's  business,  to  believe  the  defendant  was  at  Chicago 
at  the  time  the  notices  were  sent  by  him,  such  notices  would  be  due 
diligence  on  the  part  of  the  plaintiff,  and  sufficient  to  charge  the 
defendant." 

If  we  were  permitted  to  treat  the  matter  as  a  question  of  injury  to 
the  plaintiff  in  error,  there  would  be  no  difficulty  whatever  in  saying 
that  he  lost  nothing  by  the  course  pursued  by  the  defendant  in  error, 
and  probably  was  actually  informed  of  the  dishonor  of  the  bills 
sooner  than  he  could  have  been,  if  the  notices  had  been  sent  to  his 
residence  in  New  Jersey.  But  we  are  not  at  liberty  to  take  so  wide  a 
view  of  the  subject.^  The  law  has  very  definitely  settled  what  shall 
constitute  due  diligence  in  such  cases,  and  when  the  facts  are  ascer- 
tained, it  is  the  duty  of  the  court  to  determine,  as  a  question  of  law, 

1  Cf.  Foster  v.  Parker,  2  C.  P.  D.  18,  post,  p.  304. 


WALKER  V.   STETSON.  279 

whether  reasonable  diligence  has  been  used;  and  it  cannot  be  sub- 
mitted to  the  jury  as  a  question  of  fact.  Bank  of  Columbia  v.  Law- 
rence, 1  Peters,  578;  Bank  of  Utica  v.  Bender,  21  Wend.  643  ;* 
Carroll  v.  Upton,  3  Comst.  272 ;  Wheeler  v.  Field,  6  Met.  290 ;  Beldeu 
V.  Lamb,  17  Conn.  442 ;  Lorain  Bank  of  Elyria  v.  Townsend,  2  Ohio 
State,  343.  The  object  has  been  to  attain  the  greatest  possible  cer- 
tainty in  a  matter  so  vital  to  the  interests  of  the  mercantile  com- 
munity, and  the  equities  of  particular  cases  have  not  been  allowed 
to  interfere  with  the  attainment  of  this  object.  In  this  State,  these 
rules  have  been  fully  adopted  and  constantly  enforced,  and,  if  we  saw 
reason  now  to  doubt  their  justice  or  policy,  we  should  find  ourselves 
unable  to  change  them,  without  a  corresponding  change  should  take 
place  in  States  and  countries  with  which  our  commercial  relations 
are  so  extensive  and  important. 

The  parties  in  this  case  not  residing  in  the  same  place,  there  is  no 
doubt  that  it  was  a  proper  case  for  sending  the  notices  by  mail,^  and 
in  such  cases  it  is  well  settled  that  putting  into  the  post-ofl&ce  season- 
ably a  notice  properly  directed  is,  in  itself,  due  diligence,  or  construc- 
tive notice,  and  will  be  sufficient,  although  it  never  reaches  the  party 
to  whom  it  is  directed.  Woodcock  v.  Houldsworth,  16  Mees.  &  W. 
124;  Dickins  v.  Beal,  10  Peters,  570;  Jones  v.  Lewis,  8  Watts  &  S. 
14.  As  to  the  place  to  which  the  notice  should  be  directed,  it  is 
equally  well  settled  that  it  should  be  sent  to  the  drawer  or  indorser's 
residence  or  place  of  business,  if  either  is  known  to  the  holder,  or, 
upon  diligent  inquiry,  can  be  ascertained;  and  if  neither  are  known 
nor  can  be  found,  the  law  dispenses  with  any  notice  whatever.  Bank 
of  the  United  States  v.  Carneal,  2  Peters,  543 ;  Chitty,  Bills,  486 ; 
Bayley,  Bills,  280.  But  while  this  is  the  general  principle,  the  spirit 
of  the  rule  certainly  is,  that  the  notice  should  be  sent  to  such  place 
that  it  will  be  most  likely  promptly  to  reach  the  person  for  whom  it 
is  intended;  and  hence,  in  its  application  to  particular  cases,  it  has 
often  been  held  that  a  notice  is  sufficient  if  sent  to  the  post-office 
where  the  party  usually  receives  his  letters,  although  not  that  of  his 
residence,  as  well  as  to  that  where  he  resides ;  ^  and  in  all  cases  the 
notice  may  be  sent  to  the  place  pointed  out  by  the  drawer  or  indorser, 
and  in  general  will  be  sufficient,  both  in  reference  to  himself  and 
parties  who  stand  behind  him  on  the  bill.  Eeid  v.  Payne,  16  Johns. 
218;  Bank  of  Geneva  v.  Howlett,  4  Wend.  328;  Bank  of  United 
States  V.  Lane,  3  Hawks,  453 ;  Shelton  v.  Braithwaite,  8  Mees.  &  W. 
252.  Indeed,  it  is  suggested  in  the  present  case  that  the  statement 
made  by  the  plaintiff  to  the  defendant  in  error  sufficiently  indicated 
Chicago  as  the  place  to  which  the  notices  might  be  sent.    Whatever 

1  Post,  p.  283. 

»  N.  I.  L.  §  1 13.  It  may  in  all  caees  be  given  by  delivering  it  personally  or  throngh 
the  mails. 

8  N.  I.  L.  §  125. 


280  indorsee's  contract. 

of  weight  this  suggestion  may  properly  have,  it  can  only  be  considered 
by  us  when  the  case  in  the  court  below  appears  to  have  been  decided 
upon  that  ground.  As  yet  this  consideration  has  not  been  passed 
upon  in  that  court. 

How  then,  in  view  of  the  foregoing  principles,  stands  the  case 
before  us?  Was  Chicago,  in  the  sense  of  the  legal  rule,  so  far  the 
residence  or  place  of  business  of  the  party  as  to  make  the  notices  sent 
there  constructive  notice  of  the  dishonor  of  the  bills  ?  A  very  careful 
examination  of  all  the  evidence  now  contained  in  the  record  has  fully 
satisfied  us  that  it  was  not.  Upon  this  point,  there  is  no  conflict  in 
the  evidence.  The  plaintiff  below  says  the  defendant  informed  him 
he  was  going  to  Chicago  "  to  dispose  of  a  quantity  of  lumber,  which 
he  was  about  shipping  to  that  place,  and  should  return  from  there  to 
Cleveland ; "  that  he  knew  the  defendant  had  been  to  Chicago,  but 
did  not  know  that  he  was  there  when  the  notices  were  mailed,  and  had 
reason  to  believe  he  did  not  receive  them  there,  as  he  was  soon  after- 
ward back  to  Cleveland.  The  defendant  says  he  went  to  Chicago,  and 
was  there  from  the  1st  to  the  24th  of  November,  "  disposing  of  a 
quantity  of  lumber,"  and  in  the  afternoon  of  the  day  last  named,  he 
left  Chicaf^o,  and  arrived  at  Cleveland  on  the  morning  of  the  26th; 
that  he  had  no  permanent  business  at  Chicago,  and  was  there  for  a 
temporary  purpose  only,  and  never  received  the  notices  sent. 

The  question  is  then  reduced  to  this :  Does  going  to  a  city  to  dis- 
pose of  property,  which  occupies  the  party  for  three  weeks  of  time, 
without  one  word  of  explanation  as  to  the  mode  of  doing  the  business, 
or  his  relations  to  the  post-office,  make  such  city  his  place  of  business 
within  the  meaning  of  the  commercial  rule?  If  we  were  to  affirm 
that  it  did,  the  principle  must  have  a  very  wide,  and  as  we  think  a 
very  disastrous,  application  to  a  large  class  of  business  men,  dealing 
more  largely  than  any  other  in  commercial  paper.  The  stock  and 
produce  of  the  West  are  taken  to  the  eastern  cities,  by  persons  en- 
gaged in  that  business,  to  be  sold ;  and  most  western  merchants,  once 
or  twice  in  each  year,  spend  from  a  few  days  to  a  few  weeks  at  the 
eame  places,  replenishing  their  stocks  of  goods.  Did  anybody  ever 
suppose  that  these  persons  were  bound  to  watch  the  post-offices  in 
those  cities  for  notices  of  the  protest  of  their  paper?  We  think  not; 
and  yet,  if  these  notices  are  siifficient,  we  see  no  distinction  to  be 
taken  between  this  case  and  theirs.  It  is  very  certain  that  no  decided 
case  has  given  any  countenance  to  the  supposition  that  such  a  notice, 
not  received  by  the  party,  would  be  sufficient. 

The  cases  of  Tunstall  v.  Walker,  2  Sm.  &  M.  638,  and  Chouteau 
V.  Webster,  6  Met.  1,  have,  perhaps,  gone  to  the  verge  of  the  law,  but 
they  are  very  far  from  reaching  this  case.  In  each  of  those  cases,  the 
defendant  was,  at  the  time  the  notice  was  forwarded  to  him  at  Wash- 
ington, a  senator  in  Congress,  and  in  actual  attendance  on  that  body. 
The  first  of  these  cases  had  been  before  decided  by  the  High  Court 


WALKER  V.   STETSON.  281 

of  Errors  and  Appeals,  and  is  reported  in  1  How,  (Miss.)  259.  Upon 
the  then  state  of  the  evidence,  the  court  held  that  a  notice  sent  to 
Washington  City,  when  the  senator  had  a  residence  in  the  State  which 
he  represented,  would  not  be  sufficient  to  charge  him  as  an  indorser; 
and  the  reason  assigned  is  that  "  his  absence  was  but  temporary,  and 
the  duration  of  that  absence  uncertain.  In  case  of  such  absence  from 
home,  the  law  presumes  that  some  member  of  the  family  is  still  at 
the  residence,  and  that  communications  will  be  forwarded  to  the 
proper  address."  But,  upon  a  further  trial  of  the  case,  it  was  proved 
that  the  defendant  had  no  actual  residence  in  Mississippi,  and  had 
left  no  agent  at  his  last  place  of  abode  to  receive  or  forward  his  let- 
ters ;  that  from  the  4th  of  February,  when  the  notice  was  forwarded, 
to  the  4th  of  March  ensuing,  he  was  in  the  actual  discharge  of  his 
official  duties  at  Washington,  and  in  the  daily  habit  of  receiving  his 
letters  at  the  post-office  in  that  city;  and,  upon  this  state  of  facts, 
the  court  held  the  notice  sent  to  that  city  sufficient.  In  the  case  of 
Chouteau  v.  Webster,  the  defendant  had  left  an  agent  in  Boston 
in  charge  of  his  business,  but  this  was  unknown  to  the  holder  of 
the  paper,  and  upon  an  agreed  statement  of  the  facts  showing  that  the 
notice  was,  in  due  time,  deposited  in  the  post-office  directed  to  the 
defendant  at  Washington,  where  he  was  then,  and  for  some  time 
afterward,  in  attendance  upon  a  session  of  Congress;  and  that  all 
letters  addressed  to  members  were  regularly  and  immediately  taken 
from  the  post-office  by  officers  of  the  Senate,  and  delivered  to  such 
members,  the  court  held  the  notice  sufficient.  Shaw,  C.  J.,  after  pre- 
mising the  caution  that  the  "  decision  is  founded  on  the  circum- 
stances of  the  particular  case,  and  may  be  varied  by  other  facts," 
proceeds  to  place  it  upon  the  ground  that,  while  the  defendant's  dom- 
icile was  at  Boston,  his  "  actual  residence  "  was  at  Washington,  "  to 
which,  for  the  time  being,  he  was  fixed  by  his  public  duty."  We  have 
no  doubt  of  the  correctness  of  these  decisions;  and  no  comment  can 
be  necessary  to  distinguish  them  from  a  case  where  the  party  simply 
visits  a  place  for  a  purpose  clearly  temporary  and  special,  with  no 
proof  to  show  that  he  has  identified  himself  with  its  business,  or 
established  any  relations  with  its  post-office.^  Eegarding  that  as  this 
case,  we  are  clearly  of  the  opinion  that  the  plaintiff  in  error  was  en- 
titled to  the  instruction  he  asked,  and  that  the  learned  judge  erred  in 
the  qualifications  he  annexed  to  the  instruction  given. 

If  we  were  entirely  satisfied  of  the  correctness  of  this  qualification 
in  the  abstract,  we  should  still  be  compelled  to  reverse  the  judgment 
for  the  reason  that  there  was  no  evidence  to  give  any  wider  scope  to 
the  inquiry  than  that  contemplated  in  the  instruction  asked  for.  That 
this  was  an  error  has  been  settled  by  this  court,  and  the  value  of  jury 

1  Tlstahlishinsj  relations  with  the  post-office  in  that  place  conld  have  no  effect, 
other  than  to  make  the  city  where  the  defendant  was  temporarily,  his  place  of  busi- 
ness for  the  purpose  of  receiving  notice. 


282  indorser's  contract. 

trial  will  very  much  depend  upon  the  observance  of  the  principle.  In 
Bain  v.  Wilson,  10  Ohio  State,  16,  the  instruction  asked  and  given, 
as  well  as  the  qualification  annexed  by  the  court,  were  all  held  to  bo 
a  correct  exposition  of  the  law ;  and  yet,  as  "  there  was  no  evidence 
before  the  jury  which  required  or  even  authorized  the  qualification 
annexed  by  the  court,"  the  judgment  was  reversed.  The  court  say: 
"  The  judge  must  confine  himself  in  his  remarks  to  the  law  and  evi- 
dence of  the  case.  So  far  from  being  under  any  obligation  to  call 
the  attention  of  the  jury  to  a  conjectural  state  of  facts,  it  would  be 
highly  improper  for  him  to  do  so."  And  the  reason  for  this  is  very 
pertinently  stated  in  one  of  the  cases  referred  to :  "  Jurors  are  con- 
stantly inclined  to  look  to  the  opinion  of  the  judge  for  instruction  as 
to  what  is  and  what  is  not  evidence.  When  he  tells  them  to  determine 
a  given  problem  from  the  evidence  before  them,  they  can  hardly  do 
otherwise  than  infer  that,  in  his  judgment,  there  is  evidence  upon 
which  their  verdict,  when  given,  may  rest."  Fay  v.  Grimsteed,  10 
Barb.  321. 

But  we  are  very  far  from  being  satisfied  that  the  qualification  an- 
nexed in  this  case  does  contain  a  correct  statement  of  the  law.  After 
stating  that,  if  the  plaintiff  in  error  was  in  Chicago  for  a  purpose 
merely  temporary,  the  notices  would  not  be  sufficient,  the  court  pro- 
ceed to  say  that  if  his  business  there  was  such  as  would  detain  him 
an  indefinite  time,  and  "  might  occupy  him  there  during  the  re- 
mainder of  the  season  of  navigation  on  the  lakes,"  it  might  be  proper 
to  send  the  notices  to  that  place.  If  he  went  there  for  the  special 
purpose  stated  in  the  evidence,  we  do  not  think  it  would  make  any 
difference  that  he  could  not  tell  precisely  when  he  would  be  able  to 
sell  his  property;  and,  when  it  is  remembered  that  this  was  in  the 
month  of  November,  we  do  not  think  that  a  delay  in  effecting  his 
object  until  the  navigation  should  close  would  be  in  any  way  decisive. 
At  most,  it  would  be  but  a  circumstance,  entitled  to  its  just  weight 
with  others  in  determining  the  question  whether  Chicago  was  his 
place  of  business,  or  whether  he  was  a  mere  sojourner  there  for  a 
special  and  limited  purpose.^  In  the  one  case,  he  might  be  charged 
by  a  notice  sent  to  that  post-office,  because  he  is  presumed  to  have 
established  relations  with  it;  in  the  other,  no  such  presumption 
arises,  and  he  can  be  charged  only  upon  the  actual  receipt  of  the 
notice.  Indeed,  when  the  whole  instruction  is  taken  together,  it 
amounts  to  little  less  than  a  request  to  the  jury  to  go  beyond  the 
uncontradicted  and  legally  insufficient  facts  in  evidence,  and  inquire 
into  the  motives  of  the  plaintiff  below;  and  concluding  with  the 
positive  instruction  that,  if  he  had  sufficient  reason  "  to  believe  the 
defendant  was  at  Chicago  at  the  time  the  notices  were  sent,"  they 
would  be  sufficient  to  charge  him. 

^  But  cf.  N.  I.  L.  §  125,  3,  providing  that,  if  a  party  is  sojourning  in  another  place, 
notice  ma^-  be  sent  to  the  place  where  he  is  so  sojourning. 


BANK   OF  UTICA  V.   BENDER.  283 

Without  perhaps  intending  to  do  so,  it  seems  to  us  that  the  court 
has  incautiously  surrendered  its  rightful  province  to  judge  of  the 
sufficiency  of  the  facts  to  constitute  due  diligence,  and  has  devolved 
that  duty  upon  the  jury.  To  approve  of  that  would  be  to  abandon 
all  that  has  been  gained  in  the  way  of  certainty,  in  the  determination 
of  questions  of  this  character. 

WTiile  it  is  true  that  the  rules  necessary  to  be  observed  in  charg- 
ing parties  conditionally  liable  upon  negotiable  paper  are  strict, 
and  require  much  care  and  promptitude  on  the  part  of  the  holder, 
yet  they  are  such  as  long  experience  has  demonstrated  to  be  necessary, 
and  a  substantial  compliance  with  them  lies  at  the  very  foundation 
of  the  contract  into  which  the  drawer  or  indorser  enters.  His  con- 
tract is  conditional ;  and  to  make  it  absolute,  without  a  fair  perform- 
ance of  the  conditions,  would  be  to  make  a  contract  for  him,  instead 
of  enforcing  the  one  he  has  made  for  himself. 

The  judgment  must  be  reversed,  and  the  cause  remanded  to  the 
District  Court  of  Cuyahoga  County  for  further  procedings. 


BANK   OF   UTICA   v.   BENDEE. 

Supreme  Court  of  New  York,  October,  1839.     21  Wend.  643. 

Whether  notice  of  dishonor  has  been  given  is  a  question  of  the  exercise  of  due 
diligence,  for  the  court  to  decide.^ 

Assumpsit  by  the  holder  against  an  indorser  of  a  bill  of  exchange. 
Defence,  that  due  notice  had  not  been  given.  Verdict  for  the  plain- 
tiff, under  instructions  that  the  evidence  (stated  in  the  opinion) 
was  sufficient  to  charge  the  defendant;  to  which  the  defendant 
excepted.    Motion  for  a  new  trial.    The  facts  appear  in  the  opinion. 

[Argument  not  reported.] 

Bronson,  J.  When  the  facts  are  all  ascertained,  what  is  reason- 
able diligence  is  a  question  of  law.  "  This  results,"  said  Spencer, 
J.,  in  Bryden  v.  Bryden,  11  Johns.  187,  "  from  the  necessity  of 
having  some  fixed  legal  standard,  by  which  men  may  not  only  know 
the  law,  but  be  protected  by  it."  Bayley,  Bills,  142,  144  and  notes. 
The  judge  was  not  requested  to  submit  the  question  of  due  diligence 
to  the  jury;  but,  had  it  been  otherwise,  he  was  right  in  treating  it 
as  a  question  of  law,  there  being  no  dispute  about  the  facts. 

Was  there  reasonable  diligence  in  endeavoring  to  ascertain  the 
place  to  which  the  notice  should  be  directed?  Not  knowing  where 
the  defendant  lived,  the  plaintiffs  inquired  of  the  drawer  for  whose 

1  N.  I.  L.  §  129. 


284  indorser's  contract. 

accommodation  the  bill  was  discounted,  and  relying  upon  the  in- 
formation given  by  him,  they  sent  the  notice  to  Chittenango,  when 
it  should  have  been  sent  to  Manlius  or  Hartsville.  This  is  not  like 
the  case  of  the  Catskill  Bank  v.  Stall,  15  Wend.  364,  affirmed  in  error, 
18  id.  466 ;  for  there  the  person  who  took  the  note  to  the  bank,  and 
gave  the  information  on  which  the  notice  was  misdirected,  was  the 
agent  of  the  indorsers,  and  they  had  no  right  to  complain  that  credit 
had  been  given  to  what  was,  in  effect,  their  own  representation. 

But  I  am  unable  to  distinguish  this  from  the  case  of  the  Bank 
of  Utica  V.  Davidson,  5  Wend.  587.  That  was  an  action  against  the 
indorser  of  a  note  which  had  been  discounted  for  the  accommoda- 
tion of  the  maker,  and  the  notice  of  protest  was  sent  to  Bainbridge, 
when  it  should  have  been  sent  to  Masonville,  where  the  indorser  lived. 
The  person  who  took  the  note  to  the  bank,  and  gave  the  information 
on  which  the  plaintiffs  acted,  was  the  agent  of  the  maker,  and  it 
was  held  that  there  had  been  due  diligence,  and  judgment  was 
rendered  for  the  plaintiffs.  Sutherland,  J.,  mentions  the  fact  that 
the  note  was  dated  at  Bainbridge,  where  the  notice  was  sent,  and 
that  the  indorser  had  but  recently  removed  from  that  place;  but 
the  case  was  put  mainly  on  the  ground,  that  the  plaintiffs  had  a  right 
to  rely  on  the  information  given  by  the  agent  of  the  maker  when 
the  note  was  discounted.  In  the  case  at  bar,  notice  was  directed  to 
the  place  where  the  bill  purports  to  have  been  drawn;  and  the  only 
difference  between  this  and  the  case  of  the  Bank  of  Utica  v.  David- 
son consists  in  the  single  fact,  that  the  indorser  of  this  bill  had 
never  lived  at  Chittenango.  That  does  not,  I  think,  furnish  sufficient 
ground  for  a  solid  distinction  between  the  t^^o  cases. 

How  does  the  question  stand  upon  principle?  It  is  not  absolutely 
necessary  that  notice  should  be  brought  home  to  the  indorser,  nor 
even  that  it  should  be  directed  to  the  place  of  his  residence.  It  is 
enough  that  the  holder  of  a  bill  make  diligent  inquiry  for  the  in- 
dorser, and  acts  upon  the  best  information  he  is  able  to  procure. 
If,  after  doing  so,  the  notice  fail  to  reach  the  indorser,  the  mis- 
fortune falls  on  him,  not  on  the  holder.  There  must  be  ordinary 
or  reasonable  diligence,  —  such  as  men  of  business  usually  exercise 
when  their  interest  depends  upon  obtaining  correct  information. 
The  holder  must  act  in  good  faith,  and  not  give  credit  to  doubtful 
intelligence  when  better  could  have  been  obtained. 

Now,  what  was  done  in  this  case?  The  plaintiffs  inquired  of  Cobb, 
the  drawer  of  the  bill,  who  would  of  course  be  likely  to  know  where 
his  accommodation  indorser  lived.  They  saw  that  the  defendant, 
by  lending  his  name,  had  evinced  his  confidence  in  the  integrity  of 
the  drawer;  and  so  far  as  appears,  nothing  had  then  occurred  which 
should  have  led  the  plaintiffs,  or  any  prudent  man,  to  distrust  the 
accuracy  of  Cobb's  statements  concerning  any  matter  of  fact  within 
his  knowledge.    He  professed  to  be  able  to  give  the  desired  informa- 


BANK   OF  UTICA   V.   BENDER.  285 

tion,  and  his  answer  was  unequivocal.  If  Cobb  was  worthy  of  being 
believed,  there  was  no  reason  for  doubt  that  the  indorser  resided 
at  Chittenango.  The  plaintiffs  confided  in  this  information,  and 
acted  upon  it. 

But  it  is  said  that  Cobb  had  an  interest  in  giving  false  information 
for  the  purpose  of  protecting  his  accommodation  indorser,  and  con- 
sequently that  the  plaintiffs  should  not  have  trusted  to  his  statement. 
He  certainly  had  no  legal  interest  in  the  question.  If  the  bill  was 
not  accepted  and  paid  by  the  drawee,  Cobb  as  the  drawer  was  bound 
to  pay  and  take  it  up  from  the  holder;  and  if  the  indorser  was 
charged,  Cobb  was  bound  to  see  him  indemnified.  In  a  legal  point 
of  view,  it  was  wholly  a  matter  of  indifference  to  him  whether  notice 
of  the  dishonor  of  the  bill  should  be  brought  home  to  the  indorser 
or  not.  Before  anything  can  be  made  out  of  the  objection,  we  must 
say  that  the  plaintiffs  were  bound  to  suspect  that  Cobb,  when  he 
presented  the  bill,  intended  to  commit  a  fraud;  that  he  was  ob- 
taining a  discount  upon  a  draft  which  he  knew  would  not  be  paid, 
either  by  the  drawee  or  by  himself;  that  the  money  was  to  be  lost 
to  some  one,  and  that  he  preferred  the  loss  should  fall  on  the  holder 
rather  than  the  indorser ;  and  consequently,  that  he  would  give  false 
information  concerning  the  proper  place  for  directing  notice.  It  is 
quite  evident  that  the  plaintiffs  entertained  no  such  suspicion;  for, 
if  they  had,  they  would  neither  have  confided  in  the  statements  of 
Cobb,  nor  would  they  have  loaned  him  the  money.  I  think  they 
were  not  bound  to  believe  that  a  fraud  was  intended.  There  was 
nothing  in  the  circumstances  of  the  case  calculated  to  induce  such  a 
belief  in  the  mind  of  any  man  of  ordinary  prudence  and  foresight. 
This  was  an  every  day  business  transaction,  where  men  must  of 
necessity  repose  a  reasonable  degree  of  confidence  in  each  other,  and 
no  one  can  be  chargeable  with  a  want  of  diligence  for  trusting  to 
information  which  would  usually  be  deemed  satisfactory  among 
business  men.  If  there  was  any  ground  whatever  for  suspecting 
fraud  on  the  part  of  Cobb,  it  was,  to  say  the  least,  very  slight,  and 
was  fully  counterbalanced  by  the  fact  that  the  defendant  had  testi- 
fied his  confidence  in  Cobb  by  lending  his  name  as  indorser.  The 
plaintiffs  have,  I  think,  lost  nothing  by  trusting  to  information  de- 
rived from  the  drawer  of  the  bill,  instead  of  seeking  it  from  some 
other  individual. 

The  case  then  comes  to  this:  The  plaintiffs  applied  for  informa- 
tion to  a  man  worthy  of  belief,  and  who  was  likely  to  know  where  the 
indorser  lived.  They  received  such  an  answer  as  left  no  reasonable 
ground  for  doubt  that  Chittenango  was  the  place  to  which  the  notice 
should  be  sent.  I  think  they  were  not  bound  to  push  the  inquiry 
further.  Men  of  business  usually  act  upon  such  information.  They 
buy  and  sell,  and  do  other  things  affecting  their  interest,  upon  the 
credit  which  they  give  to  the  declarations  of  a  single  individual  con- 


286  indorser's  contract. 

cerning  a  particular  fact  of  this  kind  within  his  knowledge.  This 
is  matter  of  common  experience.  Ordinary  diligence  in  a  case  like 
this  can  mean  no  more  than  that  the  inquiry  shall  be  pursued  until  it 
is  satisfactorily  answered.  This  is  the  only  practical  rule.  If  the 
holder  of  a  bill  is  required  to  go  further,  it  is  impossible  to  say  where 
he  can  safely  stop.  Would  it  be  enough  to  inquire  of  two,  three,  or 
four  individuals,  or  must  he  seek  intelligence  from  every  man  in 
the  place  likely  to  know  anything  about  the  matter?  It  would  be 
difficult,  if  not  impossible,  to  answer  this  question. 

New  trial  denied. 

Note.  —  In  Dickins  v.  Beal,^  10  Peters,  572, 578,  it  was  said  by  Mr.  Justice 
Baldwin ; 

"  The  next  question  which  arises  is  on  the  admission  of  the  evidence  of  the 
postmaster  at  Nashville,  and  his  deputy,  in  relation  to  the  course  of  the  mail, 
the  usage  of  the  office,  and  the  facts  to  which  they  testify. 

We  are  at  a  loss  to  perceive  any  plausible  objection  to  the  evidence  which 
was  received  by  the  court,  on  the  assumption  that  notice  of  the  dishonor  of 
the  bills  must  be  made  out  by  the  plaintiff,  which  could  be  done  in  two  ways. 
1.  That  the  bills  had  been  duly  protested  for  non-acceptance ;  and  due  and 
legal  diligence  used  in  giving  notice  thereof  to  the  parties  on  the  bills,  in 
which  case  the  legal  presumption  of  its  receipt  in  time  would  attach.  2.  By 
proof  that  the  notice  actually  came  to  hand  in  proper  time,  though  the  letter 
containing  the  notice  was  not  properly  directed,  or  sent  by  the  most  expedi- 
tious or  direct  route.  The  fact  of  notice,  and  its  reception  in  due  time,  are 
the  only  matters  material  to  the  drawer  or  indorser  of  a  dishonored  bill;  the 
manner  or  place  in  which  he  received  such  notice  is  immaterial ;  for  all  the 
objects  to  be  answered  by  its  reception,  it  is  equally  available  to  them.  To 
the  holder  it  is  immaterial  whether  the  evidence  of  notice  consists  in  the  legal 
presumption  arising  from  due  diligence,  which  supplies  the  place  of  specific 
evidence,  and  is  binding  on  a  jury  as  proof  of  the  fact  of  its  reception,  or  it  is 
established  by  direct  evidence,  or  such  circumstances  as  will,  in  law,  justify 
them  in  drawing  the  inference.     2  Pet.  132. 

Since  the  case  of  Buckner  v.  Findley  and  Van  Leer,  2  Pet.  589,  591,  de- 
cided on  great  consideration,  it  has  been  the  established  doctrine  of  this  court, 
that  a  bill  of  exchange  drawn  in  one  of  the  States  of  this  Union,  on  a  person 
in  another,  is  a  foreign  bill,  and  to  be  treated  as  such  ;  and  that  in  this  re- 
spect they  are  to  be  considei'ed  as  States  foreign  to  each  other,  though  they 
are  otherwise  as  to  all  the  purposes  of  their  federal  constitution.  Among 
these  purposes  are  the  establishment  of  post-offices  and  post-roads,  the  regu- 
lation of  which  has  been  delegated  to  the  federal  government,  and  is  exercised 
by  their  laws  and  the  regulations  of  the  post-office  department  conformably 
thereto.  On  these  depend  all  the  communications  between  the  States  by 
mail,  the  time  of  departure  from  different  places,  its  route,  place,  and  course 
of  its  arrival  and  distribution.  The  usage  of  the  officers  employed  in  the 
various  details  of  the  operations  of  the  department,  when  acting  within  the 
line  of  their  duty,  as  prescribed  by  law  and  regulations,  become  all-important 
to  a  court  and  jury  in  deciding  on  what  is  legal  diligence  in  giving  notice,  or 
what  is  evidence  of  its  reception. 

It  is  legal  diligence  in  the  holder  of  a  bill,  if  he  avails  himself  in  time  of 
1  The  case  is  reported,  ante,  p.  152. 


THE  WAMESIT   BANK   V.   BUTTllICK.  287 

the  means  ot  communicating  notice,  which  are  thus  afforded ;  but  he  is  not 
answerable  for  any  defects  in  the  outline  or  details  of  the  regulation  of  the 
mails  for  the  route  in  which  the  letter  is  carried,  the  time  which  elapses  from 
its  deposit  in  the  office  and  delivery,  or  the  mode  of  carrying  or  distributing 
the  mails ;  ^  but  it  is  proper  that  he  should  give  evidence  of  all  these  matters,  as 
well  to  repel  the  imputation  of  laches  if  the  letter  does  not  come  to  hand  or 
not  in  due  time,  as  to  prove  its  regular  delivery,  if  there  should  be  any  doubt 
as  to  the  use  of  diligence,  in  the  direction  or  deposit  of  the  letter.  Such 
evidence  is  uniformly  received  iu  cases  arising  on  the  notice  of  dishonored 
bills." 


THE    WAMESIT    BANK   v.    BUTTRICK. 

Supreme  Court  of  Massachusetts,  October,  1858,     11  Gray,  387. 

And  to  enclose  notices  for  all  prior  parties  iu  an  envelope  addressed  to  the  last  in- 
dorser  is  due  diligence  on  the  part  of  the  holder ;  and  all  parties  are  deemed  to  be 
notified  thereby.^ 

AcTiox  of  contract  upon  a  promissory  note,  with  a  first  count 
against  Fiske  and  Norcross  the  first  indorsers,  a  second  count 
against  Thomas  Lord,  the  second  indorser,  and  a  third  count  against 
Buttrick,  the  third  indorser,  as  allowed  by  St.  1852,  c.  312,  §  3. 
The  defendants  answered  severally. 

At  the  trial  in  the  Court  of  Common  Pleas,  there  was  evidence 
tending  to  show  that  the  plaintiffs  sent  the  note  for  collection  to 
their  agents,  the  Bank  of  Commerce  at  Boston,  who  indorsed  it  and 
sent  it  to  their  agents  in  New  York;  that  on  the  24th  of  March, 
1856,  payment  was  demanded  of  the  maker  and  refused,  and  the  note 
duly  protested  for  non-payment,  and  notices  thereof,  addressed  to 
each  indorser,  on  the  same  day  enclosed  by  the  notary  in  a  letter  to 
the  Bank  of  Commerce  at  Boston,  and  put  into  the  post-office  at  New 
York  and  the  postage  paid;  that  this  letter  was  never  received  by 
the  Bank  of  Commerce,  but  was  lost;  that  the  plaintiffs'  cashier 
received  the  note  with  a  copy  of  the  protest  on  the  27th  or  possibly 
the  28th  of  March,  1856,  and  before  the  evening  of  the  28th  went 
to  Buttrick  with  the  note  and  notified  him  of  its  dishonor,  and  asked 
him  to  waive  demand  and  notice,  which  he  refused  to  do,  saying  that 
he  had  received  no  notice;  and  that  the  cashier  did  riot  know  of 
the  failure  of  the  notices  until  Buttrick  told  him.  The  plaintiffs 
further  offered  to  prove  that  the  note  wnth  a  copy  of  the  protest  was 
received  at  the  Bank  of  Commerce  on  the  26th  of  March  and  trans- 
mitted the  same  day  to  the  plaintiffs. 

But  Morris,  J.,  upon  this  evidence  ruled  that  Buttrick  was  dis- 
charged from  his  liability  as  indorser,  by  reason  of  want  of  due 

1  N.  I.  L.  §  122. 

2  Cf.  Van  Brunt  v.  Vaughn,  47  la.  145. 


288  indorsee's  contract. 

diligence  in  the  plaintiffs  in  notifying  him  of  the  dishonor  of  the 
note;  and  directed  a  verdict  for  him,  which  was  returned,  and 
judgment  rendered  thereon  for  Buttrick,  and  the  action  continued 
so  far  as  related  to  the  other  defendants.  The  plaintiffs  alleged 
exceptions. 

[Argument  reported.] 

BiGELOW,  J.  The  facts  show  that  due  diligence  was  used  in 
giving  notice  of  the  dishonor  of  the  note  to  the  defendant.  Notices 
in  due  form,  directed  to  all  the  indorsers,  of  the  non-payment  of  the 
note  were  seasonably  put  into  the  post-office  in  New  York  under 
cover  to  the  last  indorser.  This  was  according  to  the  usage  and  prac- 
tice of  merchants  and  bankers,  and  shows  a  sufficient  compliance 
with  the  rule  of  law  requiring  notice  to  indorsers  of  the  dishonor 
of  a  note  or  bill  of  exchange.  It  is  immaterial  that  the  holder  or 
last  indorser  held  the  note  for  collection  only,  and  was  not  an 
indorser  for  a  valuable  consideration.     Eagle  Bank  v.  Hathaway, 

5  Met.  215.  The  notices  having  been  seasonably  and  properly  put 
into  the  post-office,  it  is  immaterial  that  they  were  never  received 
and  forwarded,  by  reason  of  being  lost  in  the  mail.    Munn  v.  Baldwin, 

6  Mass.  316.  Due  diligence  did  not  require  anything  further  to  be 
done  in  order  to  hold  the  indorsers.  Story  on  Bills,  §  382 ;  Bayley 
on  Bills  (2d  Amer.  ed.),  275. 

Exceptions  sustained. 


NICHOLLS    V.    WEBB. 

Supreme  Court  of  the  United  States,  February,  1823.     8  Wheat.  326. 

Upon  dishonor  a  foreign  bill  must  be,  an  inland  bill  or  promissory  note  may  be 
protested. 1 

The  case  is  stated  in  the  opinion. 

[Argument  not  reported.] 

Story,  J.  This  is  a  writ  of  error  to  the  District  Court  of  Loui- 
siana. The  suit  was  broiight  by  Mr.  Webb,  as  indorsee,  against  Mr. 
Nicholls,  as  indorser  of  a  promissory  note,  dated  the  15th  of  January, 
1819,  and  made  by  Thomas  H.  Fletcher,  for  the  sum  of  $4880, 
paA^able  to  Nicholls  or  order,  at  the  Nashville  Bank,  and  indorsed  by 
Nicholls,  by  his  agent,  to  the  plaintiff.  The  note  became  due  on 
the  18th  of  July,  which  being  Sunday,  the  note,  of  course,  was  pay- 

iJN.  I.  L.  §§  135,  169-177. 


NICHOLLS   V,   WEBB.  289 

able  on  the  preceding  Saturday,^  The  cause  came  on  for  trial  upon 
petition,  and  answer,  according  to  the  usual  course  of  proceedings 
in  Louisiana,  the  answer  setting  up,  among  other  things,  a  denial 
of  due  demand,  and  notice  of  non-payment;  and  upon  the  trial, 
the  jury  returned  a  verdict  for  the  plaintiff.  The  court  thereupon 
ascertained  the  sum  due,  and  entered  judgment  for  the  plaintiff, 
according  to  what  is  understood  to  be  the  usual  practice  of  that  State. 

Several  questions  have  been  argued  at  the  bar,  which  may  be  at 
once  laid  out  of  the  case,  since  they  do  not  arise  upon  the  record; 
and  we  may,  therefore,  proceed  to  examine  that  alone  upon  which  any 
judgment  was  pronounced  in  the  court  below. 

From  the  issue  in  the  cause,  the  burden  of  proof  of  due  demand 
of  payment,  and  due  notice  of  the  non-payment  to  Nicholls,  rested 
on  the  plaintiff.  It  appears  that  the  demand  was  made,  and  notice 
given,  at  the  request  of  the  plaintiff,  by  one  Washington  Perkins, 
a  notary  public,  who  died  before  the  trial.  The  original  protest 
was  annexed  to  the  plaintiff's  petition,  and  contained  the  usual 
language  in  this  instrument,  stating  a  demand,  and  refusal  of  pay- 
ment at  the  Nashville  Bank,  on  the  17th  of  July,  the  18th  being 
Sunday,  and  that  he,  the  notary,  "  duly  notified  the  indorsers  of  the. 
non-pa5'ment."  Among  other  evidence  to  support  the  plaintiff's 
case,  he  offered  this  protest,  together  with  the  deposition  of  Sophia 
Perkins,  the  daughter  of  the  notary.  She  stated,  in  her  deposition, 
that  her  father  kept  a  regular  record  of  his  notarial  acts,  and 
uniformly  entered,  in  a  book  kept  by  himself,  or  caused  the  deponent 
to  do  it,  exact  copies  of  the  notes,  bills,  etc. ;  and  in  the  margin 
opposite  to  the  copy  of  the  protest  made  memorandums  after  noti- 
fication to  indorsers,  if  any,  of  the  fact  of  such  notification,  and 
the  manner;  and  that  his  notarial  records  had  been,  ever  since  his 
death,  in  the  house  where  she  lived.  And  to  her  deposition,  she 
annexed,  and  verified  as  true,  a  copy  of  the  protest  in  this  case^*- 
The  copy  of  the  protest  states  the  demand,  most  probably  by  mistake, 
to  have  been  made  on  the  19th,  instead  of  the  17th  of  July,  1819, 
and  contains  a  memorandum  on  the  margin :  "  Indorser  duly  noti-* 
fied  in  writing  19th  of  July,  1819,  the  last  day  of  grace  being  Sun^^ 
day,  the  18th.  Washington  Perkins."  In  other  respects  the  protest 
is  the  same  in  form  as  that  annexed  to  the  petition.  To  the  intro-^ 
duction  of  this  deposition,  as  well  as  of  the  protest,  as  evidence,  the 
defendant,  Nicholls,  objected,  and  his  objection  was  overruled  by 
the  court,  and  the  papers  were  laid  before  the  jury.    A  bill  of  excep- 

1  This  because  the  note  was  entitled  to  prace  and  the  third  day  fell  on  the  1 8th', 
which  was  Sunday.  In  such  a  case,  by  the  law  merchant,  the  note  becomes  payable 
on  the  preceding  day,  because  grace,  which  was  a  period  of  indulgence,  was  not  to  be 
increased.  It  would  be  otherwise  if  the  paper  were  not  entitled  to  grace,  and  the 
maturity  fell  on  Sunday  or  other  non-secular  day;  tlic  instrument  would  then  be 
payable  on  the  following  day.    Bigelow,  Bills  and  Notes,  116,  117 ;  N.  I.  L.  §  102.  " 

19 


290  indokser's  contract. 

tions  was  t<iken  to  the  decision  of  the  court  in  so  admitting  this  evi- 
dence ;  and  the  sole  question  now  before  us,  is,  whether  that  decision 
was  right.  What  that  evidence  might  legally  conduce  to  prove,  or 
what  its  effect  might  be,  if  properly  admitted,  is  not  now  a  question 
before  us.  It  was  l^ft  to  the  jury  to  draw  such  inferences  of  fact 
as  they  might  justly  draw  from  it;  and  whether  they  were  right  or 
wrong  in  their  inference,  we  cannot  now  inquire. 

It  does  not  appear  that,  by  the  laws  of  Tennessee,  a  demand  of 
the  payment  of  promissory  notes  is  required  to  be  made  by  a  notary 
public,  or  a  protest  made  for  non-payment,  or  notice  given  by  a 
notary  to  the  indorsers.  And  by  the  general  commercial  law,  it  is 
perfectly  clear,  that  the  intervention  of  a  notary  is  unnecessary  in 
these  cases.  The  notarial  protest  is  not,  therefore,  evidence  of  itself, 
in  chief,  of  the  fact  of  demand,  as  it  would  be  in  cases  of  foreign 
bills  of  exchange;  and  in  strictness  of  law,  it  is  not  an  official  act. 
But  we  all  know  that,  in  point  of  fact,  notaries  are  very  commonly 
employed  in  this  business;  and  in  some  of  the  States  it  is  a  gen- 
eral usage  so  to  protest  all  dishonored  notes,  which  are  lodged  in, 
or  have  been  discounted  by  the  bank.  The  practice  has,  doubtless, 
grown  up  from  a  sense  of  its  convenience,  and  the  just  confidence 
placed  in  men  who,  from  their  habits  and  character,  are  likely  to 
perform  these  important  duties  with  punctuality  and  accuracy.  We 
may,  therefore,  safely  take  it  to  be  true  in  this  case,  that  the  pro- 
testing of  notes,  if  not  strictly  the  duty  of  the  notary,  was  in 
conformity  to  general  practice,  and  was  an  employment  in  which  he 
was  usually  engaged.  If  he  had  been  alive  at  the  trial,  there  is  no 
question  that  the  protest  could  not  have  been  given  in  evidence, 
except  with  his  deposition,  or  personal  examination,  to  support  it. 
His  death  gives  rise  to  the  question,  whether  it  is  not,  connected  with 
other  evidence,  and  particularly  with  that  of  his  daughter,  admissible 
secondary  evidence  for  the  purpose  of  conducing  to  prove  due  demand 
and  notice. 

The  rules  of  evidence  are  of  great  importance,  and  cannot  be 
departed  from  without  endangering  private  as  well  as  public  rights. 
Courts  of  law  are,  therefore,  extremely  cautious  in  the  introduction 
of  any  new  doctrines  of  evidence  which  trench  upon  old  and  estab- 
lished principles.  Still,  however,  it  is  obvious,  that  as  the  rules  of 
evidence  are  founded  upon  general  interest  and  convenience,  they 
must,  from  time  to  time,  admit  of  modifications,  to  adapt  them  to 
the  actual  condition  and  business  of  men,  or  they  would  work  manifest 
injustice;  and  Lord  Ellenborough  has  very  justly  observed,  that 
they  must  expand  according  to  the  exigencies  of  society.  Pritt  v. 
Fairclough,  3  Camp.  Rep.  305.  The  present  case  affords  a  striking 
proof  of  the  correctness  of  this  remark.  Much  of  the  business  of 
the  commercial  world  is  done  through  the  medium  of  bills  of  ex- 
change and  promissory  notes.     The  rules  of  law  require  that  due 


NICHOLLS  V.   WEBB.  291 

notice  and  demand  should  be  proved,  to  charge  the  indorser.  "What 
would  be  the  consequence,  if,  in  no  instance,  secondary  evidence 
could  be  admitted,  of  a  nature  like  the  present  ?  It  would  materially 
impair  the  negotiability  and  circulation  of  these  important  facilities 
to  commerce,  since  few  persons  would  be  disposed  to  risk  so  much 
property,  upon  the  chance  of  a  single  life;  and  the  attempt  to 
multiply  witnesses  would  be  attended  with  serious  inconveniences 
and  expenses.  There  is  no  doubt  that,  upon  the  principles  of  law, 
protests  of  foreign  bills  of  exchange  are  admissible  evidence  of  a  de- 
mand upon  the  drawee ;  and  upon  what  foundation  does  this  doctrine 
rest,  but  upon  the  usage  of  merchants,  and  the  universal  convenience 
of  mankind?  There  is  not  even  the  plea  of  absolute  necessity  to 
justify  its  introduction,  since  it  is  equally  evidence,  whether  the 
notary  be  living  or  dead.  The  law,  indeed,  places  a  confidence  in 
public  officers;  but  it  is  here  extended  to  foreign  officers  acting  as 
the  agents  and  instruments  of  private  parties. 

The  general  objection  to  evidence  of  the  character  of  that  now 
before  the  court,  is,  that  it  is  in  the  nature  of  hearsay,  and  that  the 
party  is  deprived  of  the  benefit  of  cross-examination.  That  prin- 
ciple also  applies  to  the  case  of  foreign  protests.  But  the  answer 
is,  that  it  is  the  best'  evidence  the  nature  of  the  case  admits  of.  If 
the  party  is  dead,  we  cannot  have  his  personal  examination  on  oath; 
and  the  question  then  arises,  whether  there  shall  be  a  total  failure  of 
justice,  or  secondary  evidence  shall  be  admitted  to  prove  facts,  where 
ordinary  prudence  cannot  guard  us  against  the  effects  of  human 
mortality?  Vast  sums  of  money  depend  upon  the  evidence  of 
notaries  and  messengers  of  banks;  and  if  their  memorandums,  in 
the  ordinary  discharge  of  their  duty  and  emplo3'ment,  are  not  ad- 
missible in  evidence  after  their  death,  the  mischiefs  must  be  very 
extensive.  .  .  . 

(Authorities  upon  the  admissibility  of  secondary  evidence  here 
considered. ) 

We  think  it  a  safe  principle,  that  memorandums  made  by  a  per- 
son in  the  ordinary  course  of  his  business,  of  acts  or  matters  which 
his  duty  in  such  business  requires  him  to  do  for  others,  in  case  of  his 
death,  are  admissible  evidence  of  the  acts  and  matters  so  done.  It 
is  of  course  liable  to  be  impugned  by  other  evidence;  and  to  be 
encountered  by  any  presumptions  or  facts  which  diminish  its  credi- 
bility or  certainty.  A  fortiori,  we  think  the  acts  of  a  public  officer, 
like  a  notary  public,  admissible,  although  they  may  not  be  strictly 
official,  if  they  are  according  to  the  customary  business  of  his  office, 
since  he  acts  as  a  sworn  officer,  and  is  clothed  with  a  public  author- 
ity and  confidence. 

It  is,  therefore,  the  opinion  of  the  court,  that  the  evidence  ex- 
cepted to  in  this  case  was  rightly  admitted.  The  variance  between 
the  copy  and  the  original  protest,  as  to  the  time  of  the  demand. 


292  indorsee's  contract. 

might  have  been  explained  to  the  satisfaction  of  the  jury  at  the 
trial;  but  it  forms  no  ground  upon  which  this  court  is  called  upon 
to  express  any  opinion. 

Judgment  affirmed,  with  costs. 

Note.  —  By  the  law  merchant,  in  the  case  of  a  foreign  bill,  protest  was  a 
necessary  step,  and  the  dishonor  of  the  bill  could  be  proved  only  by  the 
notary's  certificate,  if  it  was  in  existence  and  could  be  produced.  Ocean  Bank 
V.  Williams,  102  Mass.  141.  In  the  case  of  inland  bills  or  promissory  notes, 
the  step,  though  permissible,  was  not  necessary,  and  the  certificate  of  protest  of 
such  instruments  was  not  the  "  best "  evidence ;  it  might,  however,  be  intro- 
duced as  secondary  evidence  to  prove  the  dishonor,  as  in  Nicholls  v.  Webb, 
supra.  So,  in  the  case  of  a  foreign  bill,  inasmuch  as  it  was  no  part  of  the 
official  duty  of  the  notary  to  give  notice  of  dishonor,  a  statement  in  the  certifi- 
cate of  protest  that  notice  had  been  given  was  not  received  as  evidence  of  that 
fact.  Statutes  have  very  generally  made  the  certificate  of  protest  of  all 
instruments  prima  facie  evidence  of  all  facts  stated  therein,  including  notice 
of  dishonor.  See  Eev.  Laws,  Mass.  eh.  73,  §  13 ;  Bigelow,  Bills  and  Notes, 
ch.  X.  §  1. 


THE  WINDHAM  BANK  v.   NORTON. 

Supreme  Court  of  Connecticut,  July,  1852.     22  Conn.  213. 

Failure  of  presentment  at  maturity  is  excused  by  any  inevitable  or  unavoidable 
accident,  not  attributable  to  the  fault  of  the  holder,  provided  he  make  presentment  as 
soon  thereafter  as  practicable.^ 

Assumpsit  against  indorsers  of  a  bill  of  exchange,  drawn  by 
George  Hobart,  of  Norwich,  Connecticut,  upon  Mansfield,  Hall,  & 
Stone,  of  Philadelphia,  and  by  them  accepted,  for  $417.26;  dated 
January  31,  1849,  and  payable  four  months  after  date,  to  the  order 
of  the  defendants. 

The  facts  were  found  by  the  court,  by  agreement  of  the  parties, 
as  follows:  Said  bill  of  exchange  was,  on  the  day  of  its  date,  ac- 
cepted by  said  Mansfield,  Hall,  &  Stone,  "  payable  at  the  Farmers 

and  Mechanics'  Bank,"  in  the  city  of  Philadelphia.    On  the day 

of  February,  1849,  the  defendants  procured  said  draft  to  be  dis- 
counted by  the  plaintiffs,  and  then  indorsed  and  delivered  it  to  them. 
During  the  same  month  of  February,  the  plaintiffs  forwarded  said 
draft,  by  the  United  States  mail,  to  the  Ohio  Life  and  Trust  Co., 
a  banking  corporation  in  the  city  of  New  York,  for  collection,  and 
indorsed  the  same  to  their  cashier,  as  follows :  "  Pay  G.  S.  Coe, 
Esq.,  cashier,  or  order ; "  signed,  "  Samuel  Bingham,  cashier."  The 
bill,  so  indorsed,  was,  in  a  day  or  two  thereafter,  and  in  due  course 
of  mail,  received  by  said  Ohio  Life  and  Trust  Co.     The  third  day 

1  N.  I.  L.  §§  98,  99.     So  of  notice  of  dishonor,  id.  §§  129,  130;  and  of  protest,  §  176. 


THE  WINDHAM  BANK  V.   NORTON.  293 

of  grace,  June  3,  being  Sunday,  the  draft  was  actually  due  and 
payable  on  Saturday,  June  2.     During  the  year  1849,  there  were 
Iwo  mails  per  day,  each  way,  between  New  York  and  Philadelphia, 
those  for  the  latter  place  leaving  New  York,  one  at  nine  a.  m., 
the  other  at  four  and  a  half  p.  m.,  and  both  due  at  Philadelphia  in 
five  hours  from  their  departure.    The  Farmers  and  Mechanics'  Bank 
were  the  Philadelphia  correspondents  of  the  Ohio  Life  and  Trust 
Co.,  and  communications  by  mail  passed  between  them  daily.     On 
the  morning  of  June  1,  the  cashier  of  the  Ohio  Life  and  Trust  Co. 
enclosed  this  draft  with  others,  addressed  in  the  proper  and  usual 
mode,  to  the  Farmers  and  Mechanics'  Bank,  and  deposited  said  letter 
in  the  United  States  post-office,  at  the  city  of  New  York,  in  season 
for  the  afternoon  mail  of  that  day  for  Philadelphia.    That  letter  was 
duly  deposited  in  said  mail,  and  said  mail  left  New  York,  and  arrived 
at  Philadelphia  in  due  and  usual  time;   but  the  mail-bags  contain- 
ing the  letters  for  Philadelphia  were,  by  the  post-office  clerks  in  the 
office  at  New  York,  marked  to  be  forwarded  to  Washington,  and 
were,  therefore,  not  delivered  at  Philadelphia,  but  carried  to  "Wash- 
ington.   At  Washington  the  mistake  was  discovered,  and  said  mail- 
bags  forwarded  to  Philadelphia,  which  place  they  reached  in  the 
course  of  Sunday,  June  3.     On  the  morning  of  the  next  day  said 
letter,  with  the  draft  enclosed,  was  delivered  from  the  post-office  at 
Philadelphia  to  said  Farmers  and  Mechanics'  Bank,  who,  by  their 
cashier,  refused  payment  of  the  same,  and  between  the  hours  of  nine 
and  ten  a.  m.  of  the  day  placed  said  draft  in  the  hands  of  a  notary 
public,  for  protest.    Said  notary,  between  the  hours  of  nine  a.  m.  and 
three  p.  m.  of  said  day,  presented  said  draft  at  the  counter  of  said 
bank  for  payment,  and  received  for  answer  from  said  cashier  that 
he  was  ordered  b}-^  the  acceptors  not  to  pay  it,  and  that,  had  he  pre- 
sented it  on  Saturday,  June  2,  he  should  have  given  him  the  same 
answer.    Said  notary  thereupon,  on  said  fourth  day  of  June,  in  due 
and  proper  form,  protested  said  draft,  and  made  out  written  notices 
to  the  drawer  and  the  several  indorsers  of  the  non-payment  of  said 
draft,  and  enclosed  said  notices,  with  the  notice  of  protest,  in  a  letter, 
and  on  the  same  day  deposited  the  same  in  the  post-office  in  said 
Philadelphia,   duly  addressed   to   George    S.    Coe,   cashier   of   Ohio 
Life  and  Trust  Co.,  New  York,  who  had  indorsed  said  draft  to  the 
Farmers  and  Mechanics'  Bank,  and  by  whom  said  letter  was,  in  due 
course  of  mail,  received.     Said  Coe,  on  the  same  day  on  which  he 
received  them,  enclosed  said  letter  of  protest  and  said  notices,  except 
the  one  to  himself,  in  a  letter  duly  addressed  to  the  plaintiffs,  and 
deposited  the  same  in  the  city  of  New  York  in  season  for  the  next 
mail.    The  same  was,  in  due  course  of  mail,  received  by  the  plaintiffs, 
who,  on  the  day  of  the  receipt  thereof,  enclosed  said  notices  to  the 
defendants,  as  indorsers,  and  said  notice  to  said  drawer   (his  resi- 
dence being  unknown),  in  a  letter  duly  addressed  to  the  defendants, 


294  indorser's  contract. 

and  deposited  it  in  the  post-office  at  Windham,  in  season  for  the 
next  mail,  and  the  same  was,  in  due  course  of  mail,  received  by  the 
defendants.  Mansfield,  Hall,  &  Stone  became  insolvent,  and  sus- 
pended pa3Tnent  on  the  twelfth  day  of  April,  1849,  and  on  the  next 
day  sent  to  the  Farmers  and  Mechanics'  Bank  the  following  notice 
in  writing : 

"  E.  N.  Lewis,  Esq.,  Cash. 

You  will  please  pay  no  more  notes  or  drafts  drawn  by  us,  and 
payable  at  your  bank,  until  further  notice,  as  they  will  not  be  pro- 
vided for. 

Very  respectfully  yours, 

Mansfield,  Hall,  &  Stone.'' 

No  further  notice  was  sent,  and  said  bank,  from  that  time  forward, 
acted  upon  this  order,  and  refused  payment  of  all  notes  or  drafts, 
payable  at  the  bank,  by  said  firm.  The  business  hours  of  the  Phila- 
delphia banks  were,  in  1849,  from  nine  a.  m.  to  three  p.  m.  Owing 
to  the  miscarriage  of  the  United  States  mail,  as  above  stated,  said 
draft  was  not  presented  for  payment  on  Saturday,  June  2,  when  it 
became  due,  and  was  never  presented  for  payment  at  any  other  time 
than  on  said  fourth  day  of  June. 

It  has  been  the  usage  of  the  banks  and  merchants  of  this  country, 
for  the  last  forty  years,  to  make  use  of  the  United  States  mail  in 
forwarding  negotiable  notes  and  bills  of  exchange,  for  collection  or 
acceptance.  It  is  the  custom  of  the  "Windham  Bank,  and  the  four 
Norwdch  banks,  to  forw^ard  all  paper  in  their  hands,  payable  abroad, 
within  five  or  eight  days  after  it  comes  into  their  hands,  without 
reference  to  the  length  of  time  it  has  to  run. 

The  questions  of  law  arising  upon  these  facts,  and  on  such  fur- 
ther facts  as  the  jury  might  rightfully  infer,  were  reserved  for  the 
advice  of  this  court. 

[Argument  reported.] 

Storks,  J.  The  defendants  first  insist  that  the  averments  in  this 
declaration,  of  a  due  presentment  of  the  draft  in  question  and  notice 
of  its  non-payment,  must  be  strictly  proved,  and  that  they  are  not 
sustained  by  proof  of  the  facts  set  up  by  the  plaintiffs  by  way  of  ex- 
cuse. Whatever  may  be  the  course  of  authorities  elsewhere,  it  is  well 
settled  here  that  those  allegations  are  supported  by  evidence  of  matter 
of  excuse,  or  a  waiver  of  demand  and  notice.^  Norton  v.  Lewis, 
2  Conn.  479,  and  Camp  v.  Bates,  11  Conn.  487,  are  decisive  on  this 
point. 

The  other  and  more  important  question  in  this  case  is,  whether 

1  See  Armstrong  v.  Chadwick,  127  Mass.  156. 


THE  WINDHAM  BANK  V.   NORTON.  295 

the  plaintiffs  are  excused  for  the  non-presentment  of  this  draft  for 
payment  on  the  day  when  it  became  due.  The  last  day  of  grace  being 
Sunday,  it  was  payable  on  the  preceding  Saturday,  which  was  the 
second  day  of  June,  1849.  This  question  depends  on  whether  the 
plaintiffs  are  chargeable  with  negligence  in  not  presenting  it  on  that 
day. 

If  the  agent  of  the  plaintiffs,  to  whom  they  sent  it  to  be  forwarded 
for  presentment  and  collection,  and  who  transacted  this  business 
for  them,  was  guilty  of  such  negligence,  it  is,  of  course,  imputable 
to  the  plaintiffs.  And  it  is  not  important  to  this  question  either 
that  the  defendants,  in  fact,  sustained  no  damage  by  the  draft  not 
having  been  presented  for  payment  when  it  fell  due,^  or  that  it  would 
not  have  been  paid  by  the  acceptor,  if  it  had  then  been  presented. 
The  indorser,  on  a  question  of  due  presentment  for  payment,  is  not 
affected  by  either  of  these  circumstances.  Nor,  indeed,  do  the  plain- 
tiffs claim  to  recover  on  either  of  these  grounds. 

The  question  of  negligence  here  presented  depends  on  the  inquiry 
whether,  under  the  circumstances  of  this  case,  the  delay  of  the  plain- 
tiffs' agent  in  not  forwarding  this  draft  to  Philadelphia  until  the 
last  mail  left  New  York  for  that  place,  on  the  day  next  preceding 
that  on  which  the  draft  fell  due,  constituted  a  want  of  reasonable  or 
due  diligence  in  regard  to  its  presentment.  We  say  under  the  circum- 
stances, because  there  is  no  positive  or  absolute  rule  of  law  which 
determines  within  what  precise  time  the  holder  of  a  bill  of  exchange 
must,  in  all  cases  whatever,  or  at  all  events,  avail  himself  of  the 
authorized  mode  of  transmission  adopted  in  this  instance,  to  for- 
ward such  paper  for  presentment.  The  general  principle,  established 
by  all  the  adjudged  cases,  as  well  as  the  approved  elementary  writers, 
is,  that  reasonable  diligence  in  the  presentment  of  a  bill  for  payment 
is  required  of  the  holder,  and  that,  therefore,  if  there  has  been  no 
want  of  such  diligence,  he  is  excused.  Story,  Bills,  c.  10;  Chitty, 
Bills,  c.  9,  10;  Story,  Prom.  Notes,  c.  7,  §  368;  Patience  v.  Town- 
ley,  2  Smith,  223,  224. 

In  applying  this  principle,  the  general  rule  is,  that  it  must  be 
presented  for  payment  on  the  very  day  on  which,  by  law,  it  becomes 
due,  and  that,  unless  the  presentment  be  so  made,  it  is  a  fatal  ob- 
jection to  any  right  of  recovery  against  the  indorser.  But,  although 
this  is  the  general  rule,  it  is  not  a  universal  one,  and  prevails  only 
under  the  qualification,  which  is  really  a  part  of  the  rule  itself,  that 
there  is  no  negligence,  or  want  of  reasonable  diligence,  in  not  making 
such  presentment.  The  whole  rule,  therefore,  more  properly  stated, 
is,  that  the  presentment  must  be  on  the  day  on  which  the  bill  becomes 
due,  unless  it  is  not  in  the  power  of  the  holder,  by  the  use  of  reason- 
able diligence,  so  to  present  it.  By  the  very  statement  of  this  rule, 
as  thus  fully  expressed,  it  is  plain  that,  on  the  question  whether  the 
1  See  Foster  r.  Parker,  2  C.  P.  D.  18,  post,  p.  304. 


298  indorser's  contract. 

holder  is  excused  on  this  ground  for  not  thus  presenting  it,  or, 
in  other  words,  whether  there  was  negligence  on  his  part,  or  a  want  of 
reasonable  diligence,  no  absolute  or  positive  rule  can,  from  the  nature 
of  the  case,  be  laid  down  which  shall  apply  under  all  circumstances. 
We  have  no  evidence  of  any  general  custom  of  merchants  in  regard 
to  the  precise  time  within  which  mercantile  paper  is  usually  for- 
warded, in  order  to  be  presented  for  payment,  so  that  the  law 
merchant  furnishes  us  no  guide  on  this  point.  And  it  is  clear  that 
the  strict  rule  of  the  common  law,  by  which  an  inability  to  perform 
the  terms  or  condition  of  a  contract,  by  reason  of  inevitable  accident 
or  casualty,  constitutes  generally  no  excuse  for  their  non-performance, 
is  not  applicable  to  mercantile  instruments  of  this  description. 
Therefore,  the  excuse  for  non-presentment  in  this  case  presents  the 
ordinary  question  of  negligence.  That  question  may,  and  often  does, 
depend  on  such  a  variety  of  circumstances,  or  those  of  such  a 
peculiar  character,  that  it  is  very  difficult,  if  not  impossible,  to 
reduce  them  to  any  fixed  or  invariable  rule.  But,  in  regard  to  such 
a  question,  as  applicable  to  the  non-presentment  of  a  bill  or  note 
when  it  is  due,  it  is  considered  a  well-settled  rule  that  such  want  of 
presentment  is  excused  by  any  inevitable  or  unavoidable  accident 
not  attributable  to  the  fault  of  the  holder,  provided  there  is  a  present- 
ment by  him  as  soon  afterward  as  he  is  able;  by  which  is  intended 
that  class  of  accidents,  casualties,  or  circumstances  which  renders 
it  morally  or  physically  impossible  to  make  such  presentment.  Judge 
Story,  in  speaking  of  this  ground  of  excuse,  says :  "  It  has  been 
truly  observed  by  a  learned  author,"  referring  to  Mr.  Chitty,  "  that 
there  is  no  positive  authority  in  our  law  which  establishes  any  such 
inevitable  accident  to  be  a  sufficient  excuse  for  the  want  of  a  due 
presentment.  But  it  seems  justly  and  naturally  to  flow  from  the 
general  principle,  which  regulates  all  matters  of  presentment  and 
notice,  in  cases  of  negotiable  paper.  The  object,  in  all  such  cases, 
is  to  require  reasonable  diligence  on  the  part  of  the  holder;  and 
that  diligence  must  be  measured  by  the  general  convenience  of  the 
commercial  world,  and  the  practicability  of  accomplishing  the  end 
required,  by  ordinary  skill,  caution,  and  effort."  And  he  cites  the 
remark  of  Lord  Ellenborough,  in  Patience  v.  Townley,  2  Smith, 
223,  224,  that  due  presentment  must  be  interpreted  to  mean,  pre- 
sented according  to  the  custom  of  merchants,  which  necessarily 
implies  an  exception  in  favor  of  those  unavoidable  accidents  which 
must  prevent  the  party  from  doing  it  within  regular  time.  Story, 
Bills,  §  258. 

Applying  these  principles  to  this  case,  we  are  of  opinion  that 
the  plaintiffs  are  not  chargeable  with  a  want  of  reasonable  diligence. 

No  fault  or  impropriety  is  imputable  to  them,  by  reason  of  their 
having  selected  the  public  mail  as  the  mode  of  forwarding  the  draft 
in  question,  to  the  bank  in  Philadelphia,  where  it  was  payable.     It 


THE   WINDHAM   BANK   V.    NOETON.  297 

is  properly  conceded  by  the  defendants  that  such  mode  of  transmis- 
sion was  in  accordance  with  the  general  commercial  usage  and  law,  in 
the  case  of  paper  of  this  description.  Indeed,  it  is  recommended  in 
the  books  as  the  most  proper  mode  of  transmission,  as  being  the  least 
hazardous,  and  therefore  preferable  to  a  special  or  private  conveyance. 
But,  although  the  public  mail  was  a  legal  and  proper  mode  by  which 
to  forward  this  paper,  it  was  their  duty  to  use  it  in  such  a  manner 
that  they  should  not  be  chargeable  with  negligence  or  unreasonable 
delay.  If,  therefore,  they  put  the  draft  into  the  post-office  at  so 
late  a  period  that,  by  the  ordinary  course  of  the  mail,  it  could  not, 
or  there  was  reasonable  ground  to  believe  that  it  would  not,  reach 
the  place  of  its  destination  in  season  for  its  presentment  when  due, 
we  have  no  doubt  that  there  would  be,  on  their  part,  a  want  of 
reasonable  diligence,  which  would  exonerate  the  indorser.  On  the 
other  hand,  to  throw  the  risk  of  every  possible  accident,  in  that 
mode  of  forwarding  the  draft,  upon  the  holder,  where  there  has  been 
no  such  delay,  would  clearly  be  most  inconvenient,  unreasonable, 
and  unjust,  as  well  as  contrary  to  the  expectation  and  understanding 
of  the  indorser,  who  is  presumed  to  be  aware  of  the  general  usage 
and  law  in  regard  to  the  transmission,  by  mail,  of  this  kind  of  paper, 
and  must  therefore  be  supposed  to  require  only  reasonable  diligence 
in  this  respect  on  the  part  of  the  holder;  and  would,  indeed,  be 
inconsistent  with  the  rule  itself,  which  sanctions  its  transmission 
in  that  manner.  It  has  been  suggested  that  the  principle  should 
be  adopted,  that  when  the  holder  resorts  to  the  public  mail,  he 
should  be  required  to  forward  the  presentment  at  so  early  a  period, 
that  if  by  any  accident  it  should  not  reach  the  place  of  its  present- 
ment in  the  regular  course  of  the  mail  there  should  be  time  to  recall 
it,  and  have  it  presented  when  and  where  it  falls  due;  or  that,  at 
least,  it  should  be  forwarded  in  season  to  ascertain  whether  it 
reached  there  by  that  time,  and  to  make  such  a  demand  or  present- 
ment for  payment  as  is  required  in  the  case  of  lost  bills.  We  find 
no  authority  whatever  for  any  such  rule,  nor  would  it,  in  our  opinion, 
comport  with  the  principle  now  well  established,  requiring  only 
reasonable  diligence  on  the  part  of  the  holder,  or  with  the  policy 
which  prevails  in  regard  to  such  commercial  instruments.  It  would, 
in  the  first  place,  be  the  means  of  restraining  the  transfer  of  such 
paper  within  such  a  limited  time  as  to  impair,  if  not  to  destroy, 
its  usefulness  and  value,  arising  out  of  its  negotiable  quality;  and, 
in  the  next  place,  it  would  in  many  cases  be  wholly  impracticable. 
The  casualties  incident  to  this  mode  of  transmission  are  most  various 
in  their  character,  and  cannot,  of  course,  be  foreseen ;  and  they 
might,  in  the  case  of  forwarding  mercantile  paper,  be  such  as  to 
render  it  impossible  to  ascertain  its  miscarriage,  or  to  recall  it  in 
season  to  remedy  the  difficulty.  In  the  case  of  the  draft  now  before 
us,  for  example,  if  it  had  been  placed  by  the  plaintiffs  in  the  post- 


298  indorser's  contract. 

office  at  Windham,  where  they  were  located,  and  transacted  their 
business,  for  transmission  direct  from  thence  to  Philadelphia,  on  the 
very  day  when  they  became  the  holders  of  it,  which  was  between  three 
and  four  months  before  it  became  due,  and,  by  an  accident  or  mis- 
take of  the  postmaster  in  the  former  place,  similar  to  that  which 
occurred  in  this  case  at  New  York,  it  had  been  mailed  to  one  of  the 
most  distant  parts  of  our  country,  or  to  a  foreign  country  (which 
would  not  have  been  more  singular  than  that  it  should  have  been 
mistakenly  mailed,  as  in  the  present  case,  for  Washington),  it  might 
not  have  been  practicable  for  the  plaintiffs  to  learn  the  accident, 
or  obviate  its  effect,  before  the  paper  fell  due.  In  short,  such  a  rule 
as  that  suggested  would  be  merely  artificial  in  its  character,  productive 
of  great  inconvenience  and  injustice  in  particular  cases,  without  any 
corresponding  general  benefits,  and  change  the  whole  course  of 
business  in  regard  to  a  most  extensive  and  important  class  of  mer- 
cantile transactions.  Nor  has  any  other  arbitrary  or  positive  rule 
been  suggested  which  is  not  equally  obnoxious  to  the  same  or  similar 
objections. 

The  only  remaining  inquiry  is,  whether  the  plaintiffs  are  charge- 
able with  negligence  for  not  forwarding  the  draft  in  question  by 
an  earlier  mail  from  ISTew  York  to  Philadelphia.  It  was  sent  by  the 
usual,  legal,  and  proper  mode.  It  was  deposited  in  the  post-office  in 
season  to  reach  the  place  where  it  was  payable,  before  it  fell  due, 
by  the  regular  course  of  the  next  mail;  and  there  was  no  reason  to 
believe  that  it  would  not  be  there  duly  delivered.  It  was  actually 
sent  by  that  mail,  and,  but  for  the  mistake  of  the  postmaster  where 
it  was  mailed  in  misdirecting  the  package  containing  it,  would  have 
reached  its  proper  destination,  and  been  received  there  in  season  for 
its  presentment  when  due.  It  in  fact  reached  that  place  when  it 
should  have  done,  but  was  carried  beyond  it  in  consequence  of  that 
mistake.  As  that  mistake  could  not  be  foreseen  or  apprehended  by 
the  plaintiffs,  it  is  not  reasonable  to  require  them  to  take  any  steps 
to  guard  against  it.  Indeed,  they  could  not  have  done  so,  as  they 
had  no  control  or  supervision  over  the  postmaster.  They  had  a  right 
to  presume  that  the  latter  had  done  his  duty.  They  could  not  know 
that  he  had  misdirected  the  package  until  it  was  too  late  to  remedy 
the  consequences.  The  occurrence  of  the  draft  being  sent  beyond 
its  place  of  destination  was,  therefore,  so  far  as  the  plaintiffs  were 
concerned,  an  unavoidable  accident.  It  happened,  not  in  conse- 
quence of  any  delay  of  the  plaintiffs  in  putting  the  draft  into  the 
post-office  at  so  late  a  period  that  it  could  not,  or  probably  would  not, 
reach  its  destination  in  due  season,  but  merely  in  consequence  of 
the  act  of  the  official  to  whom  it  was  properly  confided,  done  after 
it  was  properly  in  his  charge,  by  the  plaintiffs,  for  transmission. 
The  accident,  moreover,  was  of  a  very  peculiar  and  extraordinary 
character,  and  quite  different  from  those  which  are  ordinarily  in- 


LEHMAN  V.   JONES.  299 

cident  to  that  mode  of  transmission,  and  against  which  it  would  be 
extremely  difficult,  if  not  impossible,  to  guard.  It  would  have  been 
equally  liable  to  occur  at  any  time  when  the  draft  should  have  been 
placed  in  the  post-office.  It  was  not  owing  in  any  sense  to  the  fault 
of  the  plaintiffs,  but  solely  to  that  of  the  postmaster.  Under  these 
circumstances,  we  do  not  feel  authorized  to  impute  any  blame  or 
negligence  to  the  plaintiffs.  We  are,  therefore,  of  opinion  that 
judgment  should  be  rendered  for  the  plaintiffs. 
In  this  opinion  the  other  judges  concurred. 

Judgment  for  the  plaintiffs. 


LEHMAN   V.   JONES. 

Supreme  Court  of  Pennsylvania,  May,  1841.     1  Watts  &  S.  126. 

If  the  maker  of  a  promissory  note  absconds  before  the  maturity  of  the  note,  this 
will  excuse  the  holder  from  making  presentment  at  his  last  place  of  residence ;  notice 
of  dishonor,  however,  is  not  excused. 

Assumpsit  against  Lehman  and  Stroh,  as  indorsers  of  a  promis- 
sory note. 

It  was  proved  that  Eobinson,  the  maker  of  the  note  in  suit,  had 
absconded  to  parts  unknown  and  had  not  returned.  The  objection 
was  that  no  demand  was  made  upon  Eobinson,  and  that  the  notice 
was  informal. 

The  court  below  thus  instructed  the  jury : 

Parsons,  President.  The  court  instruct  the  jury,  as  a  matter 
of  law,  if  they  believe  that  Robinson  absconded  in  December,  1835,  as 
testified  to  by  his  mother,  and  did  not  return  before  the  note  became 
due,  nor  since,  it  was  not  requisite  that  the  holders  of  the  note  should 
go  to  Jonestown,  and  attempt  to  make  a  demand  upon  him  in  order 
to  charge  the  indorsers ;  provided  the  indorsers  were  cognizant  of  the 
fact  that  the  drawers  had  left  the  State,  of  which  there  would  seem 
to  be  no  doubt,  if  the  testimony  of  Mrs.  Robinson  is  believed. 

[Argument  not  reported.] 

Per  Curiam.^  The  rule  in  Lambert  v.  Oakes  (1  Ld.  Raym.  443) 
is,  that  the  holder  must  have  demanded,  or  done  his  endeavor  to  de- 
mand, the  money.  But  the  law  is  not  so  unreasonable  as  to  require 
an  impossibility;^  and  therefore  it  is  said  (Id.  Anon.  743),  that 
where  the  drawee  of  a  bill  has  absconded  before  the  day  of  payment, 
notice  of  the  fact  is  equivalent  to  notice  of  demand  and  dishonor. 
In  Duncan  v.  McCullough,  4  Serg.  &  Rawle,  480,  the  principle  was 

1  Gibson,  C.  J.,  Rogers,  Huston,  Kennedy,  Sergeant,  JJ. 

2  N.  I.  L.  §99,  1. 


300  indorsee's  contract. 

recognized  as  being  applicable  to  a  promissory  note ;  and  it  has  been 
established  by  direct  decision  in  some  of  our  neighboring  States.  It 
would  have  been  idle  for  the  plaintiff  to  demand  payment  at  the  late 
residence  of  Robinson,  the  drawer,  after  he  had  absconded.  Where, 
indeed,  the  drawer  of  a  note  or  the  drawee  of  a  bill  has  merely  re- 
moved from  the  place  of  his  residence,  indicated  by  the  bill,  it  is  the 
business  of  the  holder  to  inquire  for  him  and  ascertain  where  he  has 
gone,  in  order  that  he  may  follow  him ;  ^  but  when  he  has  secretly 
fled,  an  application  at  the  place  would  lead  to  no  information  in 
respect  to  him;  and  the  law  requires  nothing  which  is  nugatory. 
The  other  errors  are  either  resolvable  by  this  precedent,  or  are  plainly 
unfounded. 

Judgment  affirmed. 


HALE   V.   BUER. 

Supreme  Court  of  Massachusetts,  March,  1815.     12  Mass.  86. 

Where  the  person  required  to  pay,  is  dead  at  the  maturity  of  the  instrument, 
presentment  is  not  excused,  but  shonld  be  made  upon  his  personal  representative, 
unless  the  maturity  of  the  instrument  happens  within  a  year  after  the  appointment 
of  the  representative.2 

Assumpsit  by  the  indorsee  against  the  defendant  as  indorser  of  a 
promissory  note,  signed  by  Joseph  Francis,  payable  to  the  defendant 
or  his  order,  in  sixty  days  and  grace,  dated  August  1,  1812. 

At  the  trial  of  the  action,  which  was  had  before  the  present  Chief 
Justice,  November  term,  1813,  on  the  general  issue,  it  was  in  evi- 
dence, that  Joseph  Francis,  the  promisor,  died  on  the  4th  of  Septem- 
ber, 1812,  and  that  administration  of  his  estate  was  duly  committed 
to  William  Dodd  on  the  14th  of  the  same  September,  and  that  he 
gave  legal  notice  of  his  appointment.  The  note  was  lodged  in  the 
Union  Bank,  in  Boston,  for  collection.  At  the  time  it  fell  due,  the 
runner  of  the  bank  left  a  notification  at  the  counting-room  formerly 
occupied  by  the  said  deceased,  and  where  he  usually  did  business.  No 
demand  was  made  upon  the  said  administrator,  who  lived,  and  had  a 
place  of  business,  in  Boston,  which  was  known  to  the  runner,  by 
whom  notice  was  given  to  the  defendant.' 

^  It  19  not  necessary,  however,  that  the  holder  should  follow  the  maker  or  drawer 
out  of  the  State  ;  in  snch  a  case  presentment  at  his  last  place  of  abode  or  of  business 
within  the  State,  is  all  the  indorser  can  require.  Taylor  r.  Snyder,  3  Den.  145,  onff, 
p.  21.3  ;  McOruder  v.  Bank  of  Washington,  9  Wheat.  598  ;  Wheeler  v.  Field,  6  Met.  290. 
In  Massachusetts  it  has  been  settled,  overturning  prior  cases,  that  in  the  case  of  ab- 
sconding, presentment  should  be  made  at  the  last  place  of  business  or  abode  Pierce 
V.  Cate,  12  Cu.sh.  190. 

2  Of.  N.  I.  L.  §  9.3. 

^  Observe  that  notice  was  given  ;  probably  notice  is  necessary  in  such  case,  though 
presentment  and  demand  be  excused. 


HALE   V.   BURR.  301 

One  Dench,  the  former  clerk  of  the  deceased,  at  the  request  of  the 
creditors,  took  care  of  the  property  of  the  deceased,  and  occasionally 
went  to  the  counting-room,  until  the  said  Dodd  was  appointed  ad- 
ministrator. The  said  Dodd  then  took  all  the  books  and  papers  of  the 
deceased  to  his  own  store,  and  took  the  sole  charge  of  his  other  prop- 
erty. Before  the  note  became  due,  all  the  property  of  the  deceased 
was  sold  and  delivered;  and  the  counting-room  was  not  used  for 
some  time  before.  The  estate  of  the  deceased  was  proved  to  be 
insolvent. 

A  verdict  was  returned  for  the  defendant  by  direction  of  the  judge ; 
and  it  was  agreed,  that,  if  the  court  should  be  of  opinion  that  a  de- 
mand upon  the  administrator,  under  the  circumstances  of  this  case, 
was  not  necessary  to  entitle  the  plaintiff  to  recover,  the  verdict  should 
be  set  aside,  and  the  defendant  should  be  defaulted;  otherwise,  that 
judgment  should  be  rendered  on  the  verdict. 

[Argument  not  reported.] 

Parker,  C.  J.  The  question  presented  in  this  case  is,  whether  an/ 
indorsee  of  a  negotiable  promissory  note  can  maintain  an  action] 
against  the  indorser,  the  promisor  having  died,  and  an  administrator 
having  been  appointed  and  duly  qualified  to  act,  before  the  day  of 
payment,  without  proving  a  demand  upon  such  administrator  at  the 
maturity  of  the  note.  Whether  such  demand  was  actually  made  or 
not,  according  to  the  usage  of  the  bank  where  the  note  was  left  for 
collection,  was  a  question  for  the  jury;  and  by  the  verdict  it  is  es- 
tablished that  none  was  made.  But,  as  the  jury  were  instructed  that 
such  a  demand  was  necessary,  if  that  instruction  was  not  right,  the 
verdict  must  be  set  aside. 

And  we  are  all  of  opinion  that  the  instruction  was  wrong ;  and  that 
it  is  not  necessary,  to  charge  the  indorser,  that  a  demand  should  be 
made  of  the  administrator.  The  authorities  cited  by  the  defendant's 
counsel  ^  go  merely  to  prove,  that,  in  order  to  obtain  a  protest  of  a 
bill  of  exchange,  or  to  charge  the  drawer  or  indorser,  if  the  payer  be 
dead,  it  is  incumbent  on  the  holder  to  present  the  bill  to  his  personal 
representative,  if  he  live  within  a  reasonable  distance. 

From  the  strong  analogy  subsisting  between  bills  of  exchange  and  j 
promissory  notes,  it  is  possible  that  this  rule  of  law  may  be  as  appli-  i 
cable  to  the  latter  species  of  contract  as  to  the  former.     Yet  no  ' 
authority  has  been  cited  to  show  that  the  rule  has  been  applied  to 
promissory  notes,  or  to  any  instrument  other  than  a  foreign  bill  of 
exchange,  where  by  the  law  merchant  a  protest  is  necessary .^ 

1  Chitty  on  Bills,  Story's  ed.,  172,  182;  Molloy,  L.  2,  c.  10,  §  34;  Pothier,  146. 

2  But  see  Chittv  on  Bills,  6th  ed.,  246-262;  Bayley  on  Bills,  5th  ed.,  219  ;  Thomson 
on  Bills,  444 ;  Price  v.  Yonng,  1  Nott  &  M'Cord,  438 ;  Roscoe,  Ev.  158,  2d  ed. ;  2  Phil. 
Et.  22. 


302  indorsee's  contract. 

In  England,  however,  there  may  be  reasons  for  making  a  demand 
upon  an  executor  or  administrator  of  a  deceased  promisor  in  a  note 
necessary,  which  do  not  exist  in  this  country;  and,  if  the  reasons 
upon  which  the  law  is  founded  do  not  exist,  there  is  no  cause 
why  we  should  not  decide  according  to  the  nature  and  spirit  of  the 
contract. 

In  this  State  a  demand  upon  an  administrator  would,  in  most 
cases,  be  entirely  nugatory.  He  is  not  obliged  to  pay  any  debt  of  the 
deceased,  except  such  as  are  particularly  privileged,  until  a  year 
from  his  appointment.^  If  sued  within  the  year,  he  is  entitled  to  a 
continuance,  of  course.  This  indulgence  is  given  to  enable  him  to 
collect  the  effects  of  the  deceased,  and  to  ascertain  their  sufficiency 
to  discharge  all  the  debts.  If  there  should  be  a  deficiency,  a  general 
distribution  takes  place  among  all  the  creditors,  without  regard  to  the 
character  of  their  demands,  unless  in  the  few  excepted  cases  above 
alluded  to.  Under  these  circumstances,  should  he  pay  any  debt,  and 
it  should  afterwards  appear  that  the  estate  is  insolvent,  he  pays  at  his 
peril.  A  prudent  executor  or  administrator  will,  therefore,  seldom 
hazard  the  payment  of  a  debt  before  he  has  ascertained  the  situation 
of  the  estate ;  and  a  demand  upon  him  would  be  sure  to  meet  with  a 
refusal.  Such  a  demand  would,  therefore,  be  merely  a  troublesome 
formality,  without  any  use;  and  notice  to  the  indorser,  that  (the 
promisor  being  dead)  he  will  be  looked  to  for  payment,  will  in  every 
respect  be  as  advantageous  to  him  as  a  previous  demand  upon  the 
promisor. 

It  is  well  settled,  that,  if  the  promisor  abscond  before  the  day  of 
payment,  or  has  concealed  himself,  the  necessity  of  a  demand  is  taken 
away.^  Due  diligence  to  find  him  is  all  that  is  required  in  the  latter 
case;  and,  in  the  case  of  absconding,  even  that  is  not  necessary.^ 
When  the  party  is  dead,  and  his  representative  is  not  obliged  to  pay 
his  debts  for  a  year  after  he  assumed  the  trust,  it  would  seem  as  idle 
to  require  a  demand  of  him  as  it  would  be  to  pursue  one  who  has 
absconded.* 

1  Rev.  Laws,  ch.  141,  §  1. 

2  Chitty,  70 ;  Ld.  Rayni.  743. 

8  Putnam  r.  Sullivan,  4  Mass.  45 ;  Widgery  v.  Munroe,  6  Mass.  449 ;  Whittier  v, 
Graffam,  3  Greenl.  82.  This  rule,  as  to  the  effect  of  absconding,  was  overturned 
in  Massachusetts  in  Pierce  v.  Cate,  12  Cush.  190,  in  which  it  was  hold  erroneous 
to  instruct  the  jury  that  if  the  maker  had  absconded,  leaving  no  visible  property 
subject  to  attachment,  no  presentment  of  the  note  to  the  maker,  or  demand  at  his 
dwelling-house,  or  other  inquiry  for  him,  was  necessary.  It  was  said  by  Shaw,  C.  J. : 
"  If  the  maker  has  left  the  State,  the  holder  must  demand  payment  at  his  actual  or 
last  place  of  abode,  or  of  business,  within  the  State.  Wheeler  v.  Field,  6  Met.  290." 
This  is  the  general  rule  in  cases  where  the  principal  debtor  has  removed  liis  <lomicile 
to  another  State  ;  but  is  contra  to  the  weight  of  authority  in  cases  of  absconding.  See 
Daniel,  Neg.  Instr.,  5th  ed.,  §  1144.  Cf.  N.  I.  L.  §  165,  as  to  excuse  of  presentment 
for  acceptance. 

*  Thomson  on  Bills,  444. 


HALE   V.   BURR.  303 

In  England  there  may  be  more  reason  for  requiring  such  demand ; 
for  there  the  representative  is  at  liberty  to  pay  the  debts,  although 
there  should  not  be  enough  to  pay  all,  if  he  has  regard  to  their  rank 
and  degree;  and  he  may  always  discharge  himself  by  showing  that 
he  has  paid  away  all  that  he  has  received.  He  may,  therefore,  pay  a 
bill  of  exchange,  or  promissory  note,  when  called  upon.  But  in  this 
country  it  is  otherwise ;  for,  where  the  estate  is  insolvent,  as  in  the 
present  case,  there  is  no  reason  to  presume  that  a  demand  would  be 
effectual. 

We  do  not  decide,  that,  when  a  note  shall  fall  due  after  the  expi- 
ration of  the  time  allowed  the  executor  or  administrator,  by  our 
statute,  upon  an  estate  not  represented  insolvent,  a  demand  upon 
him,  or  due  diligence  to  make  one,  must  not  be  proved.  But  in  the 
present  case  we  are  satisfied  that  no  such  demand  was  necessan^  The 
verdict  must,  therefore,  be  set  aside,  and  the  defendant  be  called.^ 

Defendant  defaulted. 

Note.  —  The  doctrine  of  Hale  v.  Burr,  supra,  was  criticised  in  Gower  v. 
Moore,  25  Me.  16,  in  which  case  Mr.  Justice  Shepley  said :  "  This  is  a  suit  by 
the  indorsee  against  an  indorser  of  a  promissory  note,  made  on  August  12, 
1841,  and  payable  in  two  years.  Before  it  became  payable  the  maker  liad 
deceased,  an  administrator  had  been  appointed,  the  estate  had  been  repre- 
sented to  be  insolvent,  commissioners  of  insolvency  had  been  appointed  and 
the  holder  of  the  note  had  proved  it  before  them.  When  the  maker  of  a  note 
dies,  before  it  becomes  payable,  the  holder  should  make  inquiry  for  his  per- 
sonal representative,  if  there  be  one,  and  present  the  note  on  its  maturity  to 
him  for  payment.  The  case  of  Hale  v.  Burr,  12  Mass.  86,  may  be  considered 
as  presenting  an  exception  to  this  rule  ;  but  doubts  have  been  expressed, 
whether  it  could  be  considered  as  either  correct  in  principle,  or  founded  upon 
sufficient  authority. 

In  this  case  the  indorser  may  be  considered  as  knowing  that  the  note 
would  not  be  paid  on  presentment,  and  that  the  estate  was  insolvent.  But 
such  knowledge  does  not  relieve  the  holder  from  his  obligation  to  make  pre- 
sentment and  give  due  notice  of  dishonor.  The  promise  of  the  indorser  is  a 
conditional  one  to  pay,  if  the  note  be  duly  presented  to  the  maker  and  season- 
able notice  be  given  to  him  of  its  dishonor. 

The  holder  cannot  assume  the  right  to  decide  that  his  performance  of  the 
condition  will  be  of  no  service  to  the  indorser,  and  thus  put  that  matter  in 
issue  to  relieve  himself  from  the  performance  of  the  condition  imposed  upon 
him  by  law.  Nicholson  v.  Goufhit,  2  H.  Bl.  609 ;  Clegg  v.  Cotton,  2  B.  &  P. 
239 ;  Pi  ideaux  v.  Collier,  2  Starkie,  57. 

'J'he  various  relations  which  the  parties,  whose  names  are  upon  negotiable 
pappr,  sustain  towards  other  persons,  whose  names  are  not  upon  it,  cannot  be 
anticipated.  'I'he  real  debtors,  who  may  feel  obliged  to  pay,  may  not  wish  to 
exhibit  themselves  as  such.  A  deceased  party  may  possibly  have  held  a  con- 
tract of  some  responsible  person  to  pay  in  case  the  note  should  be  duly  pre- 
sented for  payment.  So  may  an  indorser.  To  hold  an  indorser  liable  and  yet 
deprive  him  of  the  benefit  of  such  a  contract  could  not  be  justified.  It  is  best 
for  a  commercial  community  that  the  rules  be  simple,  subject  to  few  excep- 

1  Burrill  v.  Smith,  7  Pick.  291. 


304  INDORSEIl'S   CONTRACT. 

tions,  and  not  liable  to  be  varied  to  meet  the  apparent  injustice  of  particular 
cases." 

The  Massachusetts  cases  seem  hardly  consistent.  If  presentment  is  neces- 
sary when  the  maker  has  absconded,  to  the  knowledge  of  the  indorser,  wliy 
should  it  not  be  made  in  such  a  case  as  that  of  Hale  v.  BuvT,i>upraf  In  Pierce 
V.  Gate,  12  Cusli.  190,  192,  Chief  Justice  Shaw  lays  down  what  is  believed 
to  be  the  true  doctrine ;  he  said :  "  We  are  aware  that  in  some  of  the  eailier 
cases  in  Massachusetts,  it  was  held  that  proof  that  the  maker  had  absconded, 
or  failed,  and  become  insolvent,  so  that  a  demand  woulil  he  unavailing,  would  be 
an  excuse  of  presentment.  Putnam  n.  Sullivan,  4  Mass.  45.  But  it  has  been 
decided,  on  consideration,  and  upon  principle,  that  the  obligation  of  an 
indorser  is  conditional;  that  is,  that  he  will  be  answerable,  if  at  the  maturity 
of  the  note  the  holder  will  present  it  to  the  maker  for  payment;  and  if  there- 
upon the  maker  shall  neglect  or  refuse  to  pay  it,  and  the  holder  will  give 
seasonable  notice  to  the  indorser,  he  will  pay  it  himself.  Sandford  v.  Dilla- 
way,  10  Mass.  52  ;  Farnum  v.  Fowle,  12  Mass.  89.  These  are  the  conditions 
of  his  liability.  The  holder,  therefore,  to  charge  the  indorser,  must  show  a 
compliance  with  these  conditions,  or  that  proper  means  have  been  taken  to 
effect  a  compliance  with  them,  unless,  indeed,  he  can  prove  a  waiver  of  them 
by  the  indorser." 

If  the  productiveness  of  the  demand  be  the  test  of  its  necessity,  demand 
upon  the  administrator  of  a  solvent  estate  is  quite  as  likely  to  be  availing,  as 
presentment  at  the  last  place  of  business  or  abode  of  one  who  has  absconded ; 
but  the  productiveness  of  the  demand  is  not  the  test. 


FOSTER   V.    PARKER. 
Common  Pleas  Division  of  England,  November,  1876.     2  C.  P.  D.  18. 

That  an  indorser  of  a  bill  of  exchange  was  not  damnified  by  failure  to  take  steps 
at  maturity,  or  upon  dishonor,  is  no  excuse. 

Action  on  a  bill  of  exchange  by  an  indorsee  against  an  indorser. 
Statement  of  defence,  want  of  notice  of  dishonor.  Reply:  That 
neither  at  the  time  when  the  bill  was  drawn,  nor  afterwards,  nor 
when  it  became  due  and  on  presentment  thereof,  had  the  acceptor,  or 
the  drawer,  or  any  indorser  prior  to  the  defendant,  any  effects  of  the 
defendant  in  his  hands,  and  the  said  bill  was  drawn  by  the  drawer 
and  accepted  by  the  acceptor  and  indorsed  by  the  defendant  and  by 
the  prior  indorsers  for  the  purpose  of  raising  money  for  the  defend- 
ant, the  drawer,  the  acceptor,  and  the  said  persons  who  indorsed 
before  the  defendant,  jointly;  and  the  defendant  was  in  no  way 
damnified  even  if  there  was  no  notice  of  dishonor.  Demurrer  and 
joinder. 

[Argument  reported.] 

Denman,  J.  I  am  of  opinion  that  our  judgment  should  be  for  the 
defendant.    I  think  the  allegation  in  the  reply,  that  the  defendant 


FOSTER  V.   PARKER.  305 

was  in  no  way  damnified  by  want  of  notice  of  dishonor,  must  be 
treated  as  an  allegation  of  law,  a  mere  conclusion  from  the  previous 
allegations.  Then,  are  those  allegations  sufficient  to  make  the  reply 
good  ?  In  the  case  of  Bickerdike  v.  Bollman,  1  T.  E.  405,  it  was  held 
that  no  notice  of  dishonor  was  necessary;  but  in  all  the  subsequent 
cases  on  the  subject  it  is  laid  down  that  the  doctrine  in  that  case 
ought  not  to  be  extended;  and  that,  with  regard  to  an  indorser,  to 
excuse  notice  of  dishonor  facts  must  be  stated  which  show,  not  as 
a  mere  possibility  but  as  an  absolute  certainty,  that  he  could  not  be 
damnified  by  the  absence  of  such  notice.  The  facts  alleged  in  the 
reply  only  show  that  the  drawer,  acceptor,  and  prior  indorsers  of  the 
bill  were  jointly  interested  with  the  defendant  in  some  transactions 
for  the  purposes  of  which  the  amount  of  the  bill  was  to  be  raised.  It 
seems  to  me  that  so  far  from  these  facts  making  out  that  the  defend- 
ant could  not  be  damnified  by  want  of  notice  of  dishonor,  the  prima 
facie  inference  from  them  is  that  he  would  be.  All  the  parties  being 
interested  jointly,  prima  facie  if  the  defendant  had  to  pay  the  whole 
amount  of  the  bill  he  would  be  entitled  to  contribution  from  the 
other  parties.  The  authorities  cited  in  argument  all  show  that  the 
principle  of  Bickerdike  v.  Bollman,  1  T,  E.  405,  cannot  be  extended 
to  the  case  of  an  indorser,  unless  it  is  clearly  made  out  that  under 
no  circumstance  could  he  be  prejudiced  by  absence  of  notice.  The 
allegations  in  the  reply  do  not  make  this  out. 

LiNDLEY,  J.  To  disentitle  the  defendant  as  the  indorser  of  a  bill 
of  exchange  to  notice  of  dishonor  the  plaintiff  must  show  that  it  was 
the  defendant's  duty,  as  between  himself  and  the  other  parties  to  the 
bill,  to  provide  for  it.  It  is  obvious  that  the  court  cannot  come  to 
the  conclusion  that  the  defendant  was,  as  between  himself  and  the 
other  parties  to  this  bill,  bound  to  provide  for  it  from  the  averments 
in  this  reply.  Indeed,  the  prima  facie  inference  from  them  would  be 
that  he  was  not.  The  case  therefore  does  not  come  within  the  author- 
ity of  the  cases  in  which  notice  of  dishonor  has  been  excused.  With 
regard  to  the  general  allegation  that  the  defendant  was  not  damni- 
fied by  absence  of  notice  of  dishonor,  it  seems  to  me  insufficient  as 
being  too  vague.  It  might  mean  that  the  other  parties  to  the  bill 
would  not  have  been  able  to  pay.  He  would  be  damnified  in  the  legal 
sense  if  he  had  a  remedy  over  against  any  of  them  and  was  not  bound, 
as  between  himself  and  them,  to  meet  the  bill.  For  these  reasons  I 
agree  that  our  judgment  should  be  for  the  defendant. 

Judgment  for  the  defendant.^ 

1  See  Turner  v.  Samson,  2  Q.  B.  D.  23.  As  to  Bickerdike  v.  Bollman,  1  T.  R.  405, 
cited  supra,  see  Hopkirk  v.  Page,  2  Brock.  20;  Bigelow,  L.  C.  Bills  and  Notes,  96,  97. 


20 


306  indorser's  contract. 

GILBERT    V.    DENNIS.     " 

Supreme  Court  of  Massachusetts,  March,  1842.     3  Met.  495. 

The  party  required  to  pay  may  waive  steps  to  which  he  has  a  right,  to  wit,  pre- 
sentment and  demand ;  and  his  waiver  will  dispense  with  the  necessity  of  taking  these 
steps  to  charge  an  indorser. 

Assumpsit  by  the  indorsee  against  the  indorser  of  a  promissory 
note.     The  facts  are  stated  in  the  opinion. 

[Argument  not  reported.] 

Shaw,  C.  J 

It  appears  by  the  report,  in  the  present  case,  that  on  the  last 
day  of  grace,  the  promisor  went  to  the  store  of  the  holder,  where 
the  note  was,  and  stated  that  he  was  unable  to  pay,  and  should 
not  pay  the  note,  and  wished  the  plaintiff  to  notify  the  indorser. 
The  court  are  of  the  opinion  that  this  was  a  sufficient  demand  and 
refusal  to  constitute  a  dishonor  of  the  note.  There  are  many  cases,  in 
which  it  is  held  that  it  is  not  necessary  to  produce  and  exhibit  the 
note.  As  where  a  note  is  in  terms,  or  by  tacit  or  express  consent  of 
the  parties,  payable  at  a  bank,  it  is  sufficient  that  the  note  is  there 
ready  to  be  given  up  on  payment,  should  the  promisor  come  to  pay  it. 
State  Bank  v.  Hurd,  12  Mass.  172 ;  Wliitwell  v.  Johnson,  17  Mass. 
449 ;  Saundcrson  v.  Judge,  2  H.  B.  506.  If  the  promisor  does  not 
go  to  the  bank  and  pay  the  note,  it  is  dishonored,  and  it  would  be  an 
idle  ceremony,  to  take  the  note  from  the  files  and  make  a  demand, 
when  there  is  no  one  on  whom  to  make  it.  And  should  the  promisor 
come  and  declare  his  inability  to  pay,  his  intention  not  to  pay,  and 
leave  without  payment,  it  is  surely  not  less  a  dishonor  than  if  he  had 
stayed  away.  The  default  of  the  promisor,  in  such  cases,  is  his  not 
paying  the  note  at  the  bank;  and  the  default  of  the  promisor,  in 
whatever  it  consists,  constitutes  the  dishonor  of  the  note,  upon  which 
the  indorsee,  if  duly  notified,  may  be  legally  charged. 

In  the  present  case,  the  plaintiff  held  the  note,  the  promisor 
knew  it,  knew  it  was  due,  and  instead  of  waiting  for  the  holder  to 
come  to  him,  he  went  to  the  holder,  declared  by  his  conduct  that  he 
knew  the  note  was  due  and  payable,  and  that  the  holder  had  the  note 
ready  to  be  given  up,  and  expected  and  had  a  right  to  expect  payment 
of  him  as  promisor;  and  in  anticipation  of  a  presentment  and  ex- 
press demand,  declared  that  he  could  not  pay  the  note,  and  departed 
without  paying  it.  It  does  not  appear  that  the  holder  did  not  request 
him  to  make  payment;  and  the  circumstances  are  such  as  to  warrant 
the  inference  that  he  did.  The  declaration  of  the  promisor,  that  he 
could  not  pay,  implies  that  he  considered  the  holder  as  looking  to  him 


BERKSHIRE  BANK  V.   JONES.  307 

for  payment,  which  is  all  that  was  necessary,  and  that  he  anticipated 
a  more  formal  offer  of  the  note  and  demand  of  payment,  by  a  declara- 
tion which  rendered  it  unnecessary,  .  .  . 
[A  question  of  notice,  see  ante,  p.  254.] 

Note.  —  The  analogy  is  not  perfect  between  cases  of  instruments  payable 
at  a  bank  and  such  a  case  as  that  of  Gilbert  v.  Dennis,  supra.  When  the 
instrument  is  payable  at  a  bank,  the  presence  of  the  paper  in  the  bank,  at 
maturity,  to  the  knowledge  of  the  bank,  is  an  equivalent  of  a  formal  present- 
ment, based  upon  custom,  and  recognized  as  such  by  the  law  merchant. 
Chicopee  Bank  v.  Philadelphia  Bank,  8  Wall.  641,  ante,  p.  222. 

Gilbert  v.  Dennis  presents  a  case  of  waiver,  that  is,  waiver  by  the  primary 
debtor  of  a  presentment  and  demand  upon  him  by  the  holder.  It  is  not, 
however,  directly  a  waiver  of  the  indorser's  right  to  have  these  steps  taken* 
The  party  required  to  pay  has  the  right  to  have  the  instrument  exhibited  to 
him  before  he  can  be  compelled  to  pay  it,  Musson  v.  Lake,  ante,  p.  205,  and  this 
right  he  may  waive.  It  is  but  an  incident  that,  by  his  waiver,  the  indorser's 
right  is  destroyed. 


7^  BERKSHIRE    BANK   v.   JONES. 

Supreme  Court  of  Massachusetts,  September,  1810.     6  Mass.  524. 

The  taking  of  steps  may  be  waived  by  the  indorser ;  ^  but  a  waiver  of  notice  merely 
is  not  a  waiver  of  presentment  and  demand.* 

The  plaintiffs  declare  on  a  promissory  note  made  by  one  Amasa 
Glesen,  on  the  21st  of  October,  1807,  by  which  he  promised  the  de- 
fendant to  pay  him  or  his  order  $125,  at  the  Berkshire  Bank,  in  sixty- 
one  days;  and  on  an  indorsement  by  the  defendant,  he  waiving  all 
right  to  the  notice,  to  which,  by  law  or  custom,  he  was  entitled  as 
indorser.  The  plaintiffs  also  allege  a  request  and  refusal  by  Glesen, 
the  maker,  and  also  notice  to  the  defendant. 

The  action  was  tried  before  Sedgwick,  J.,  who  directed  a  nonsuit, 
subject  to  the  opinion  of  the  court,  whether  it  was  necessary  to  the 
support  of  this  action,  that,  previous  to  the  commencement  thereof, 
the  contents  of  the  note  declared  on  should  have  been  demanded  of 
the  promisor. 

[Argument  not  reported.] 

Parsons,  C.  J.  The  defendant  has  argued  that,  although  he 
waived  notice  of  a  refusal  of  payment  by  the  maker,  yet  he  did  not 
thereby  dispense  with  a  demand  upon  him;  for  he  might  waive  the 
notice  from  a  confidence  that  the  maker  would  pay  the  note  on 
demand. 

1  N.  I.  L.  §§  126,  127. 

'  Cf.  Id.  §  128,  that  waiver  of  protest  is  a  waiver  of  all  steps,  whether  in  the  case  of 
a  foreign  bill  or  other  negotiable  instrument. 


308  indorser's  contract. 

This  construction  of  the  waiver  we  think  correct;  and  the  objec- 
tion would  be  conclusive,  if  the  indorsement  had  not  been  made  to 
the  plaintiffs,  at  whose  office  the  note  was  to  be  demanded  and  paid. 
The  note  was  payable  on  a  day  and  at  a  place  certain ;  and  the  place 
is  the  Berkshire  Bank.  A  demand  of  payment  need  not  be  made  at 
any  other  place;  and  if  the  holder  of  the  note  is  at  the  bank  on  the 
prescribed  day,  ready  to  receive  the  money,  if  the  maker  be  there,  it 
is  enough  for  him.  And  if  the  maker  does  not  come  to  the  bank,  or 
direct  the  pajTuent  there,  he  has  broken  his  promise;  and  no  other 
notice  to  him  is  necessary. 

In  the  case  at  bar,  as  the  plaintiffs  held  this  note,  we  must  presume 
it  was  in  their  bank,  and  there  it  was  made  payable.  They  were  not 
to  look  up  Glcsen,  or  to  demand  payment  of  him  at  any  other  place. 
The  defendant,  by  his  indorsement,  guarantied  that  on  the  day  of 
payment  the  maker  would  be  at  the  bank,  and  pay  the  note ;  and  if 
he  did  not  pay  it  there,  he  agreed  that  he  would  be  answerable  in  a 
suit  at  law,  without  previous  notice  of  the  default  of  the  promisor. 

Although  we  are  satisfied  that  the  judge  was  correct  in  his  con- 
struction of  the  terms  of  the  defendant's  waiver  of  notice,  considered 
in  a  general  view,  yet  we  are  of  opinion  that,  from  the  special  tenor  of 
the  note  declared  on,  the  nonsuit  ought  to  be  set  aside ;  and  if,  on  the 
trial,  the  plaintiffs  can  show  that  on  the  day  of  payment  the  note 
was  in  the  bank,  and  that  the  ser\'ants  or  officers  of  the  plaintiffs  were 
there  during  the  usual  bank  hours,  to  receive  payment  and  give  up 
the  note,  they  will  be  entitled  to  recover,  as,  by  the  terms  of  the  note, 
they  were  not  holden  to  demand  payment  but  at  the  bank,  which  was 
impracticable  through  the  default  of  the  maker ;  and  by  the  defend- 
ant's waiver  he  cannot  claim  notice. 


ANNTILLE    NATION^AL   BANK   v.    KETTERING. 
Supreme  Court  of  Pennsylvania,  May,  1884.     106  Penn.  State,  531. 
The  waiver  may  be  written  or  oral,  though  made  at  the  time  of  indorsement. 

Assumpsit  by  the  indorsee  of  a  promissory  note  against  the 
indorser. 

The  note  was  made  by  one  Urich,  payable  to  the  defendant  or 
order,  and  by  him  indorsed  to  the  plaintiff.  It  was  proved  by  the 
plaintiff,  that  when  the  defendant  began  dealing  with  the  bank,  he 
said  that  he  did  not  wish  to  have  any  notes,  discounted  for  him,  pro- 
tested, as  he  wanted  to  save  the  cost.  Accordingly  the  plaintiff  had 
never  protested  the  notes  indorsed  by  the  defendant,  nor  had  it  made 
demand  nor  given  notice  of  dishonor  of  his  notes;   and  it  did  not 


ANNVILLE   NATIONAL   BANK   V.   KETTERING.  309 

demand  payment  nor  protest  the  note  in  suit.    Verdict  was  for  the 
defendant,  and  the  plaintiff  brought  writ  of  error. 

[Argument  reported.] 

Sterrett,  J.  No  principle  of  the  law  merchant  is  better  settled 
than  that  demand  and  notice  of  the  non-payment  of  a  negotiable  note 
may  be  waived  by  the  indorser,  either  orally  or  in  writing,  or  by  acts 
clearly  calculated  to  mislead  the  holder  and  prevent  him  from  treat- 
ing the  note  as  he  otherwise  would,  but  there  is  some  diversity  of 
opinion  as  to  what  constitutes  a  waiver  of  these  necessary  prerequi- 
sites to  charge  the  indorser.  When  a  written  waiver  of  "  demand  and 
notice"  accompanies  the  indorsement,  or  is  given  by  the  indorser 
before  maturity  of  the  note,  there  can  be  no  question  as  to  its  legal 
effect;  nor  can  there  be  any  doubt  when  the  language  employed 
clearly  imports  or  implies  the  same  thing.  It  has  been  doubted,  how- 
ever, whether  the  words  "  protest  waived,"  written  on  a  note  by  the 
indorser,  or  his  separate  request  in  writing  not  to  protest  it,  is  a 
waiver  of  both  demand  and  notice,  and  in  some  cases  these  words 
have  been  considered  insufficient  to  dispense  with  either;  but  the 
weight  of  both  reason  and  authority  is  that  they  do  constitute  a 
waiver  of  both.^  Strictly  speaking,  the  term  "  protest "  applies  only 
to  foreign  bills,  but  the  custom  to  treat  inland  bills  and  notes  in  the 
same  manner  as  foreign  bills  has  become  so  well-nigh  universal  that, 
in  common  parlance,  the  term  means  the  taking  of  such  steps  as  are 
required  to  charge  the  indorser.  For  the  same  reason,  the  word 
"  protested,"  sometimes  employed  in  giving  notice  of  dishonor  to 
indorsers  of  inland  bills  and  notes,  clearly  implies  demand,  non- 
payment, and  consequent  dishonor  of  the  bill  or  note  in  all  cases 
where  protest  is  necessary.  1  Pars.  Bills  and  Notes,  471,  575,  579, 
582,  and  authorities  there  cited. 

It  is  not  essential  that  the  waiver  should  be  in  writing.  When  the 
fact  is  established  by  competent  evidence,  a  parol  waiver  is  as  valid 
and  binding  as  a  written  one.  The  only  difference  is  in  the  character 
of  the  proof.  Barclay  v.  Weaver,  7  Harris,  396.  It  was  there  held 
that  a  verbal  agreement  between  the  holder  and  indorser  to  renew  a 
note  at  maturity,  might  be  shown  by  oral  testimony,  and  that  demand 
and  notice  were  thereby  dispensed  with.  The  general  principle  un- 
derlying nearly  all  cases  of  waiver  is  that  the  indorser  has  by  word  or 
deed  done  something  calculated  to  mislead  the  holder  and  induce  him 
to  forego  the  usual  steps  to  fix  the  liability  of  the  former. 

It  is  unnecessary  to  refer  specially  to  several  well-considered  cases 
in  other  States,  holding  that  a  waiver  of  protest,  without  more,  dis- 
penses with  demand  and  notice  of  non-payment.  They  are  in  full 
accord  with  our  own  cases  on  the  subject,  the  last  of  which  is  Hucken- 

1  N.  I.  L.  §  128. 


310  indorsee's  contract. 

«tein  V.  Herman,  34  Leg.  Int.  232.  That  was  a  suit  by  the  holder 
against  the  indorser  of  a  note  which  was  not  presented  for  payment 
at  maturity.  To  sustain  the  averment  of  demand  and  notice  of  non- 
payment, the  plaintiff  relied  on  the  words  "  protest  waived,"  written 
on  the  note  and  signed  by  the  indorser  the  day  before,  or  early  in 
the  morning  of  the  day  the  note  matured.  The  court  charged  in 
substance  that  the  words  were  equivalent  to  an  express  waiver  of  de- 
mand and  notice,  and  on  that  point  there  was  a  verdict  for  the  plain- 
tiff. In  the  per  curiam  opinion  of  this  court,  affirming  the  judgment 
of  the  Common  Pleas,  it  is  said :  "  A  waiver  of  protest  before  matur- 
ity of  a  note  is  a  waiver  of  all  the  steps  leading  to  it,  and  includes 
demand  and  notice  of  non-payment.  This,  we  think,  is  the  general 
understanding  of  a  waiver  of  protest  among  business  men.  The  very 
purpose  of  a  waiver  is  to  supersede  the  ordinary  steps  and  avoid 
trouble  and  expense.  To  waive  the  mere  act  of  the  notary,  and  yet 
Buffer  the  duty  of  making  demand  and  giving  notice  of  its  result  to 
remain,  would  scarcely  be  thought  of  by  business  men."  It  is 
argued  by  the  learned  counsel  of  defendant  that  this  conflicts  with 
the  former  ruling  of  this  court  in  Scott  v.  Greer,  10  Barr,  103,  but 
we  do  not  so  understand  it.  In  that  case  it  was  held  that  the  waiver 
of  protest  by  an  indorser  on  the  day  the  note  matured  puts  him  in  the 
same  situation  as  if  the  protest  had  been  made  and  proved:  and, 
there  being  no  contradictory  evidence,  it  is  proof  under  the  Act  of 
Assembly  of  demand,  refusal  and  notice.  It  is  true  the  learned  judge 
who  delivered  the  opinion  in  that  case  intimates  that  the  prima  facie 
case  thus  presented  by  the  plaintiff  might  have  been  rebutted  by 
showing  that  no  demand  was,  in  fact,  made;  but  what  was  said  on 
that  subject  was  aside  from  the  question  before  the  court,  and,  in  so 
far  as  his  remarks  may  be  considered  in  conflict  with  the  ruling  in 
Huckenstein  v.  Herman,  supra,  they  cannot  be  regarded  as  authority 
for  the  position  that  a  waiver  of  protest  does  not  necessarily  imply 
a  waiver  of  demand  and  notice.  The  principle  decided  in  Hucken- 
stein V.  Herman  is  akin  to  that  involved  in  Eidgway  &  Budd  v.  Day, 
1  Harris,  208,  and  Brittain  v.  The  Doylestown  Bank,  5  W.  &  S.  87. 
In  the  latter  case  the  indorser,  by  memorandum  on  the  note,  waived 
"notice  of  non-payment  by  the  maker,"  and  it  was  held  that  proof 
of  demand  was  thereby  rendered  unnecessary.  "  The  interpretation," 
said  Gibson,  C.  J.,  "  is  that  he  agreed  to  become  immediately  liable, 
without  more,  in  case  the  note  should  not  be  taken  up  at  maturity." 

In  the  case  at  bar  it  is  conceded  there  was  neither  demand  nor 
notice  of  non-payment,  nor  was  there  any  written  waiver  of  protest. 
For  the  purpose  of  sustaining  the  material  averment  of  demand  and 
notice,  testimony  was  introduced  by  plaintiff  tending  to  prove,  in 
substance,  that  during  a  course  of  dealing  with  the  bank,  defendant 
had  several  notes  discounted,  and  the  proceeds  placed  to  his  credit; 
that  when  he  first  requested  a  discount,  he  informed  the  officers  of 


ANNVILLE   NATIONAL  BANK   V.   KETTERING.  311 

the  bank  that,  desiring  to  deal  with  them,  he  would  be  obliged  to 
apply  for  discounts,  and  wished  it  to  be  understood  that  none  of  his 
notes  should  be  protested;  that,  pursuant  to  this  request,  none  of 
them  were  protested,  nor  was  payment  of  them  demanded  of  the 
maker;  and,  in  consequence  of  that  understanding,  payment  of  the 
note  in  suit  was  not  legally  demanded,  nor  was  notice  of  non-payment 
given  to  defendant.  In  view  of  this  testimony  the  court  was  re- 
quested to  charge: 

"  1st.  If  an  indorser  gives  directions  to  the  indorsee,  at  the  time 
or  before  he  brings  the  note  for  discount,  that  the  same  shall  not 
be  protested,  and  this  is  assented  to  by  the  indorsee,  it  relieves  the 
latter  from  the  duty  of  making  demand  for  payment  of  the  maker, 
and  of  giving  notice  of  the  non-payment  to  the  indorser  of  such 
note." 

"  2d.  If  the  defendant  waived  protest  of  the  note  before  ma- 
turity, no  demand  of  the  maker  was  necessary  to  charge  him  with  its 
payment." 

The  learned  judge  refused  these  points,  saying :  "  Such  waiver 
of  protest  is  prima  facie  evidence  of  presentment  to  and  demand 
upon  the  maker,  but  it  does  not  relieve  the  indorsee  from  the  neces- 
sity of  such  presentment  and  demand ; "  and  he  further  instructed 
the  jury,  in  substance,  that  if,  in  point  of  fact,  no  demand  was  made 
or  no  notice  given  to  defendant,  the  plaintiff  could  not  recover.  It 
being  conceded  that  there  was  no  legal  demand  or  notice,  the  verdict, 
as  matter  of  course,  was  for  defendant.  The  plaintiff's  testimony, 
if  believed  by  the  jury,  was  clearly  sufficient  to  have  warranted  them 
in  finding  the  facts  as  stated  in  the  foregoing  points,  and,  for  reasons 
already  suggested,  they  should  have  been  affirmed. 

When  the  alleged  waiver  is  in  writing,  its  construction  is  for  the 
court,  but  when  it  consists  of  verbal  communications,  it  is  the  special 
province  of  the  jury  to  consider  the  testimony  and  ascertain  the  facts. 
When  ascertained,  it  is  their  duty  to  apply  the  law  under  the  direc- 
tion of  the  court.  Assuming  the  facts  to  be  as  recited  in  the  points, 
the  law  as  therein  stated  is  correct,  and  hence  there  was  error  in 
refusing  to  affirm  plaintiff's  first  and  second  points,  and  in  charging 
the  jury  as  complained  of  in  the  third  specification. 

Judgment  reversed,  and  a  venire  facias  de  novo  awarded. 


312  INDOUSEU'S  CONTRACT. 

SIGERSON"   V.    MATHEWS. 

Supreme  Court  of  the  United  States,  December,  1857.     20  How.  496. 

And  the  waiver  may  be  before  or  after  maturity,  express  or  implied ;  e.  g.  a  promise 
to  ]>ay,  by  an  indorser,  made  before,  or,  with  fall  knowledge  of  the  facts,  after 
maturity  is  a  waiver  of  steps. 

The  case  is  stated  in  the  opinion  of  the  court. 
[Argument  not  reported.] 

McLean,  J.  This  is  a  writ  of  error  to  the  Circuit  Court  for  the 
District  of  Missouri. 

An  action  was  brought  by  Mathews  against  John  Sigerson,  as 
indorser  on  a  note  of  James  Sigerson,  now  deceased,  dated  the  10th 
of  March,  1853,  for  the  payment  of  the  sum  of  $2000,  two  years 
after  date,  at  the  Bank  of  the  State  of  Missouri,  with  interest  from 
the  date. 

It  was  proved  on  the  trial  that  in  1851  Mathews  advanced  largely 
to  Jolm  Sigerson  on  some  transactions  in  pork,  whereby  Sigerson 
became  indebted  to  him  in  the  sum  of  $2000;  that  Sigerson  wanted 
two  scars'  time,  on  which  Mathews  required  a  mortgage  on  real 
estate  as  security ;  but  Sigerson  offered  to  give  the  note  of  his  brother 
Jamos,  indorsed  by  himself,  instead  of  the  mortgage;  and  he  repre- 
sented that  his  brother  James  was  the  owner  of  a  valuable  real  estate 
near  St.  Louis;   which  offer  was  accepted,  and  the  note  was  given. 

Some  time  in  the  fall  of  1852,  Joseph  E.  Elder,  a  witness,  re- 
ceived the  note  from  Mathews  for  collection,  soon  after  the  death 
of  James  Sigerson,  and  before  the  note  became  due.  Witness  called 
on  Jolm  Sigerson,  and  asked  him  if  he  should  'have  the  note  pro- 
tested against  the  estate  of  James  Sigerson.  He  replied,  that  the 
witness  need  not  do  so,  and  that  the  notes  should  be  paid  at  maturity. 
The  witness  then  placed  the  note  in  his  portfolio,  where  it  remained 
until  after  due.  After  it  was  due,  witness  called  on  John  Sigerson, 
and  informed  him  that  he  had  neglected  to  put  the  note  in  bank  for 
collection,  and  asked  him  what  he  was  going  to  do.  He  said  he  would 
see  witness  in  a  few  days,  and  arrange  it.  Afterwards  Sigerson  said 
to  the  witness  that  he  did  not  consider  himself  liable  as  indorser,  as 
the  note  had  not  been  protested. 

In  February,  1852,  John  Sigerson  sold  his  interest  in  the  farm 
near  St.  Louis,  which  was  one  half  of  it,  and  which  contained  about 
one  thousand  acres,  to  James  Sigerson,  who  was  to  pay  off  tbe  in- 
cumbrances on  the  land,  which  amounted  to  about  $16,000.  James 
executed  twenty  notes  for  $2000  each,  payable  in  six,  twelve,  and  oig-h- 
teen  months;  and  John  Sigerson  made  him  a  deed.  In  July,  1852, 
James  reconveyed  the  land  to  John,  and  the  bargain  was  rescinded. 


SIGERSON   V.   MATHEWS.  313 

This  was  done  because  James  had  not  fulfilled  his  contract.  Nine- 
teen of  the  notes  were  given  up,  but  the  note  now  in  suit  was  not 
surrendered,  and  for  which  the  account  of  James  was  credited  on  the 
books  of  John.    James,  on  his  decease,  left  no  property. 

On  the  above  facts,  the  court  charged  the  jury,  "  if  they  believe 
from  the  evidence,  that,  before  the  maturity  of  the  note,  in  conversa- 
tion with  the  agent  of  the  plaintiff,  the  defendant  dispensed  with 
a  presentation  of  the  note  and  demand  of  payment,  and  promised  to 
pay  it  or  provide  for  its  payment  at  maturity,  he  cannot  now  set  up 
as  a  defence  to  this  suit,  that  the  note  was  not  presented  for  payment, 
and  demand  made  therefor,  when  it  was  due,  and  that  no  notice  of 
its  dishonor  was  given ; "  that,  "  if,  after  the  maturity  of  the  note, 
the  defendant  promised  the  plaintiff  or  his  agent  to  pay  the  same, 
having  at  the  time  of  making  said  promise  knowledge  of  the  fact 
that  the  note  had  not  been  presented  for  payment,  and  that  no  de- 
mand had  been  made  therefor,  or  notice  of  non-payment  given,  the 
defendant  cannot  now  set  up,  as  a  defence  to  said  note,  a  want  of  such 
demand  or  notice."  "  If  the  defendant  dispensed  neither  with  the 
presentation  of  the  note  and  notice,  nor  promised  to  pay  the  same, 
having  knowledge  as  above  stated,  the  plaintiff  cannot  recover." 

Exception  was  taken  to  these  instructions.  Certain  instructions 
were  asked  by  the  defendant,  which  were  refused ;  but  it  is  unneces- 
sary to  state  them,  as  they  are  substantially  embraced  in  those  given 
by  the  court. 

As  there  was  no  formal  demand  of  payment,  nor  protest  for  non- 
payment and  notice,  those  requisites  must  have  been  waived  by  the 
defendant,  to  make  him  responsible  as  indorser;  and  to  this  effect 
were  the  instructions  of  the  court;  and  we  think  the  testimony  not 
only  authorized  the  instructions  given,  but  also  the  verdict  rendered 
by  the  jury.  Before  the  note  was  due,  the  defendant  said  to  Elder, 
the  agent  of  Mathews,  and  who  held  the  note,  that  he  need  not  take 
steps  to  collect  it  from  the  estate  of  his  brother  James,  as  it  should 
be  paid  at  maturity.  This  was  an  assurance  which  could  not  be  mis- 
taken, and  it  was  relied  on  by  the  agent.  He  placed  the  note  in  his 
portfolio,  where  it  remained  until  after  it  became  due.  After  this, 
the  agent  called  on  the  defendant,  and  informed  him  that  he  had 
neglected  to  take  measures  for  the  collection  of  the  note,  and  asked 
him  what  he  was  going  to  do.  He  answered,  that  in  a  few  days  he 
would  see  the  witness,  and  arrange  it.  This  was  an  unconditional 
promise  to  pay  the  note,  which  no  one  could  misunderstand,  and 
which  he  could  not  repudiate  at  any  subsequent  period. 

A  promise  by  an  indorser  to  pay  a  note  or  bill  dispenses  with  the 
necessity  of  proving  a  demand  on  the  maker  or  drawer,  or  notice  to 
himself.  Pierson  v.  Hooker,  3  Johns.  68;  Hopkins  v.  Liswell,  12 
Mass.  52.  Where  the  drawer  of  a  protested  bill,  on  being  applied  to 
for  pa}anent  on  behalf  of  the  holder,  acknowledged  the  debt  to  be 


314  indoeser's  contract. 

due,  and  promised  to  pay  it,  saying  nothing  about  notice,  it  was  held 
that  the  holder  was  not  bound  to  prove  notice  on  the  trial.  Walker 
V.  Laverty,  6  Munf.  487.  An  unconditional  promise  by  the  indorser 
of  a  bill  to  pay  it,  or  an  acknowledgment  of  his  liabilit}',  and  knowl- 
edge of  his  discharge  by  the  laches  of  the  holder,  will  amount  to  an 
implied  waiver  of  due  notice  of  a  demand  of  the  drawee,  acceptor,  or 
maker.  Thornton  v.  Wynn,  12  Wheat.  183 ;  Bank  of  Georgetown  v. 
Magruder,  7  Peters,  287.  We  think  the  instructions  of  the  court 
were  correct,  and  that  consequently  the  judgment  must  be 

Affirmed,  with  costs. 


ARNOLD   V.    DRESSER. 

Supreme  Court  of  Massachusetts,  September,  1864.     8  Allen,  435. 

But  a  promise  to  pay  in  ignorance  of  the  fact  that  no  steps  hare  been  taken  will 
not  amount  to  a  waiver. 

Contract  against  the  indorser  of  a  joint  promissory  note. 

At  the  trial  in  the  Superior  Court,  before  Morton,  J.,  it  appeared 
that  on  the  day  when  the  note  became  due,  Theodore  S.  Stratton,  in 
behalf  of  the  plaintiff,  demanded  payment  thereof  of  the  two  prom- 
isors, but  did  not  have  the  note  in  his  possession  at  the  time;  and 
the  note  was  not  paid.  The  plaintiff  testified  that  on  the  same  day 
he  called  upon  the  defendant,  and  gave  notice  to  him  that  demand  had 
been  made  on  the  makers ;  that  one  of  the  makers  called  during  the 
interview,  and  both  he  and  the  defendant  said  that  the  note  should 
be  paid  soon. 

Upon  this  evidence,  the  judge  ruled  that  the  plaintiff  was  not 
entitled  to  recover,  and  directed  a  verdict  for  the  defendant,  which  was 
accordingly  rendered,  and  the  plaintiff  alleged  exceptions. 

[Argument  not  reported.] 

BiGELOw,  C.  J.  The  defendant  is  not  liable  as  indorser  of  the 
note  declared  on.  In  order  to  charge  him  it  was  necessary  for  the 
plaintiff  to  show  due  presentment  and  demand  of  the  note  on  both 
the  promisors ;  Union  Bank  of  Weymouth,  &c.  v.  Willis,  8  Met.  504 ;  * 
or  a  waiver  thereof  by  the  defendant.  There  were  no  such  present- 
ment and  demand.  If  a  note  is  made  payable  at  a  particular  place, 
the  holder  must  have  it  at  that  place  on  the  day  of  its  maturity,  in 
order  to  make  due  presentment;  if  it  is  not  payable  at  a  designated 
place,  the  note  must  be  presented  to  the  promisor  at  his  usual  place 
of  business  or  at  his  dwelling-house.  But  no  valid  presentment  and 
demand  can  be  made  by  any  person  without  having  the  note  in  his 

1  Ante,  p.  38. 


ARNOLD  V.   DRESSER.  315 

possession  at  the  time,  so  that  the  maker  may  receive  it  in  case  he 
pa3's  the  amount  due,  unless  special  circumstances,  such  as  the  loss 
of  the  note  or  its  destruction,  are  shown  to  excuse  its  absence.  Shaw 
V.  Eeed,  12  Pick.  132 ;  Freeman  v.  Boynton,  7  Mass.  483.^ 

Nor  was  there  any  waiver  of  due  demand  by  the  defendant.  Xo 
such  waiver  is  made,  where  an  indorser  promises  to  pay  the  note  in 
ignorance  of  the  fact  that  he  has  been  discharged  by  the  laches  of  the 
holder,  in  not  making  due  demand  of  the  promisor,  or  where  such 
promise  is  made  under  a  misapprehension  or  mistake  of  facts  con- 
cerning the  due  presentment  and  demand  of  the  note.  Low  v. 
Howard,  11  Cush.  268;  Kelley  v.  Brown,  5  Gray,  108.  In  the  case 
at  bar,  the  defendant  made  the  statement  on  which  the  plaintiff  relies 
to  show  a  waiver,  not  only  in  ignorance  of  the  fact  that  the  note  had 
not  been  duly  demanded  of  one  of  the  promisors,  but  under  a  mis- 
taken belief  that  it  had  been  so  demanded,  induced  by  the  false  state- 
ment to  that  effect  made  to  him  by  the  plaintiff. 

Exceptions  overruled. 

Note.  —  Although  the  indorser  must  know  the  facts  that  steps  have  not 
been  taken,  to  render  a  waiver  available  against  him,  he  need  not  know  the 
legal  effect  of  the  facts,  that  is,  that  he  is  discharged.  Glidden  v.  Chamberlain, 
167  Mass.  468,  495 ;  Givens  v.  Merchants'  Bank,  85  111.  442. 

1  Ante,  p.  211. 


316  accommodator's  contract. 


f 


CHAPTER   IX. 
accommodator's  contract. 


[An  accommodation  party  is  one  who  lends  to  another  the  credit 
of  his  name  on  a  negotiable  instrument,  which  is  to  be  negotiated  for 
value.^] 

THATCHER   v.    THE   WEST    EIVER   NATIONAL   BANK. 

Supreme  Court  of  Michigan,  October,  1869.     19  Mich.  196. 

One  who  becomes  a  party  to  a  negotiable  instrument  for  the  accommodation  of 
another,  is  liable  thereon  to  a  bona  Jide  purchaser,  according  to  his  contract  as  it 
appears  on  the  face  of  the  instrnment,  though  the  purchaser  had  notice  of  the 
accommodation. 2 

Assumpsit  by  the  indorsee  of  a  promissory  note  against  the  maker. 
Verdict  for  the  plaintiff,  and  the  defendant  brought  writ  of  error. 
The  facts  appear  sufficiently  in  the  opinion. 

[Argument  not  reported.] 

Christiancy,  J.  .  .  .  [A  question  of  evidence  to  prove  the  cor- 
porate existence  of  the  plaintiff  below,  the  defendant  in  error.] 

The  defence  relied  upon  by  the  defendant  below,  without  going 
here  into  unnecessary  particulars,  was  substantially,  that  the  note 
was  given  to  L.  N.  Sprague,  agent  of  the  Jamaica  Leather  Com- 
pany (to  whose  order  it  was  made  payable),  without  consideration, 
and  merely  for  the  accommodation  of  said  Leather  Company,  upon 
the  assurance  of  Sprague  that  the  note  would  be  taken  care  of  and 
the  defendant  protected;  and  that  the  bank,  the  indorsee  and  plain- 
tiff below,  received  it  with  full  notice  of  these  facts. 

The  testimony  of  the  defendant  himself,  and  perhaps  some  other 
testimony  in  the  cause,  tended  to  show,  that  the  note  was  given  for  the 
purpose  above  stated,  and  without  consideration,  and  with  the  assur- 
ance of  Sprague  above  stated. 

But  the  defendant's  own  testimony  further  tended  to  show  that 
the  note  was  given  for  the  express  purpose,  and  with  the  full  under- 
standing that  it  was  to  be  negotiated  to  the  bank  to  enable  the  Leather 
Company  to  raise  money  upon  it.    It  was  also  clearly  shown  by  other 

1  Bigelow,  Bills  and  Notes,  184 ;  N.  I.  L.  §  46.  2  n.  I.  L.  §  46. 


THATCHER  V.  THE   WEST   KIVER   NATIONAL  BANK.  317 

evidence  that  the  bank  did  discount  the  note  indorsed  in  blank  by 
Sprague,  as  agent,  and  paid  the  money  for  it;  and  there  was  no 
evidence  of  a  contrary  tendency. 

We  think  it,  therefore,  wholly  immaterial  whether  the  bank  had 
notice,  or  not,  of  the  circumstances  under  which,  and  the  purpose 
for  which  it  was  given,  and  of  the  other  facts  relied  upon  in  the 
defence.  Had  the  directors  of  the  bank,  knowing  the  nature  of  the 
previous  transactions  between  defendant  and  the  Leather  Company, 
been  present  and  heard  and  known  the  whole  arrangement  between 
Sprague  and  the  defendant,  when  the  note  was  given,  the  bank  would 
still  be  entitled  to  recover.  See  Charles  v.  Marsden,  1  Taunt.  234; 
Smith  V.  Knox,  3  Esp.  46;  Thompson  v.  Shepherd,  12  Met.  311; 
Brown  v.  Mott,  7  Johns.  361;  Lord  v.  Ocean  Bank,  20  Penn.  St. 
384;  Grant  v.  Ellicott,  7  Wend.  227;  Eenwick  v.  Williams,  2  Md. 
356;  Molson  v.  Hawley,  1  Blatch.  409;  Caruthers  v.  West,  11  Q.  B. 
143. 

The  want  of  consideration,  and  the  assurance  of  Sprague  that  the 
note  would  be  taken  care  of,  do  not  affect  the  right  of  the  bank  as 
indorsee,  though  taking  it  with  notice.  Mere  accommodation  paper 
is  generally,  at  least,  without  consideration,  and  such  assurances, 
express  or  implied,  are  always  given  or  relied  upon,  when  such  accom- 
modation paper  is  given.  Such  facts  might  constitute  a  good  defence 
as  against  the  party  for  whose  accommodation  it  is  given ;  ^  but  to 
allow  them  to  defeat  a  recovery  by  an  indorsee  who  advances  money 
upon  it  —  when  that  is  the  purpose  for  which  it  is  given  —  would 
defeat  the  very  purpose  for  which  such  paper  is  made,  and  render 
the  transaction  absurd. 

As  between  the  defendant  and  the  indorsee,  the  defendant  took  the 
risk  of  Sprague's  assurances  being  made  good,  and  his  remedy  is 
upon  him  or  the  party  he  represented. 

These  conclusions  render  it  unnecessary  to  notice  the  defendant's 
requests  to  charge  with  reference  to  the  want  of  consideration,  and 
the  question  of  notice,  or  the  charges  given  upon  these  points. 

A  copy  of  the  note  with  the  indorsement  accompanied  the  declara- 
tion, and  the  note  and  indorsement  were  read  in  evidence  without 
objection,  and  no  evidence  was  given  to  disprove  the  indorsement. 
The  court  was  therefore  right  in  refusing  to  charge  that  it  was  neces- 
sary to  prove  the  indorsement  in  any  other  way. 

We  see  no  error  in  the  record,  and  the  judgment  must  be 

Affirmed  ivith  costs. 

1  That  is,  in  a  suit  by  him  against  the  party  who  had  signed  for  his  accommodation. 


318  ACCOMxMODATOR'S  contkact. 

GRANT   V.    ELLICOTT. 
Supreme  Court  of  New  York,  May,  1831.    7  Wend.  227. 
Or  actual  knowledge  of  it. 

Assumpsit  by  indorsee  against  the  acceptor  of  a  bill  of  exchange. 
Plea,  that  the  bill  was  accepted  for  accommodation  of  the  drawer  and 
that  the  plaintiff  took  it  with  knowledge  of  the  fact.  Demurrer  to 
the  plea. 

[Argument  not  reported.] 

Savage,  C.  J.  The  defendant  says  he  ought  not  to  pay  the  bill, 
because  no  consideration  passed  between  him  and  Graham,  and  this 
was  known  to  the  plaintiffs ;  that  is,  the  defendant  accepted  the  bill 
for  the  accommodation  of  the  drawer,  which  the  plaintiffs  knew. 
This  is  no  defence;  it  was  so  decided  in  Smith  v.  Knox,  3  Esp.  46. 
Lord  Eldon  there  held  that,  where  a  bill  is  given  for  the  accommo- 
dation of  the  drawer  or  payee,  and  is  sent  into  the  world,  it  is  no 
answer  to  an  action  upon  it  against  the  acceptor,  that  he  accepted  it 
for  the  accommodation  of  the  drawer  and  that  the  fact  was  known 
to  the  holder.  In  such  case,  the  holder,  if  he  gave  a  hona  fide  con- 
sideration for  it,  is  entitled  to  recover,  though  he  had  full  knowledge 
of  the  transaction.  In  that  case,  the  plaintiff  produced  no  proof  but 
of  handwriting  of  the  parties  to  the  bill. 

The  case  of  Charles  v.  Marsden,  1  Taunt.  224,  was  very  like  this 
case.  The  action  was  brought  by  the  indorsee  against  the  acceptor. 
The  defendant  pleaded  that  it  was  accepted  for  the  accommodation 
of  the  drawer,  and  without  any  consideration,  and  that  this  was 
known  to  the  plaintiffs  when  they  took  the  bill,  after  it  was  due. 
Mansfield,  C.  J.,  says :  "  There  is  no  allegation  of  fraud  in  this  plea, 
nor  any  allegation  that  the  plaintiff  did  not  give  a  valuable  consid- 
eration for  this  bill;  it  must,  therefore,  be  presumed  that  he  did." 
Lawrence,  Justice,  says :  "  In  the  present  case,  it  is  to  be  supposed 
that  the  party  (drawer)  persuades  a  friend  to  accept  a  bill  from  him, 
because  he  cannot  lend  him  money ;  would  there  be  any  objection,  if, 
with  the  knowledge  of  the  circumstance  that  this  is  an  accommoda- 
tion bill,  some  person  should  advance  money  upon  it  before  it  was 
due?  Then  what  is  the  objection  to  his  furnishing  it  after  it  is  due ?  ^ 
For  there  is  no  reason  why  a  bill  may  not  be  negotiated  after  it  is 
due,  unless  there  was  an  agreement  for  the  purpose  of  restraining  it." 

I  know  of  no  decision  supporting  this  plea,  and  it  would  be  ex- 
tremely prejudicial  to  commercial  paper  if  it  could  be  supported. 
The  acceptor  in  a  bill  is  considered  in  the  same  light  as  an  indorser 

1  See  Chester  v.  Dorr,  41  N.  Y.  279,  post,  p.  322. 


SMALL  V.   SMITH.  319 

of  a  promissory  note;  and  it  is  well  known  that  much  of  the  paper 
discounted  in  our  banks  is  accommodation  paper,  and  it  never  has 
been  supposed  that  the  indorser  in  such  case  is  not  liable. 

Judgment  for  plaintiffs  on  demurrer,  with  leave  to  amend,  on 
payment  of  costs. 


SMALL    V.    SMITH. 

Supreme  Court  of  New  York,  October,  1845.     1  Denio,  583. 

But  he  is  not  liable  to  a  holder  who  had  notice  at  the  time  of  purchase,  that  the 
instrument  was  negotiated  in  violation  of  the  terms  upon  which  the  accommodation 
was  given. 

Assumpsit  upon  a  negotiable  note,  signed  by  the  defendant  as 
surety  for  accommodation  of  the  maker.  Defence,  fraudulent  diver- 
sion, and  that  the  plaintiff  took  the  note  with  knowledge.  Verdict 
for  the  plaintiff,  upon  instructions  to  the  jury  to  which  the  defend- 
ant excepted.  Motion  for  a  new  trial,  for  misdirection.  The  facts 
are  detailed  in  the  opinion. 

[Argument  not  reported.] 

Beardsley,  J.  If  the  evidence  given  on  the  trial  was  true,  and 
that  was  for  the  jury  to  determine,  it  is  perfectly  clear  that  the  note 
was  delivered  to  the  plaintiffs  in  violation  of  the  agreement  upon 
which  it  had  been  indorsed  by  the  defendant.  The  plaintiffs,  there- 
fore, were  not  entitled  to  recover,  unless  they  received  it  tana  fide 
and  upon  a  valuable  consideration.  Both  were  necessary.  It  must 
have  been  received  in  good  faith,  without  notice  of  the  arrangement 
on  which  the  indorsement  had  been  made,  and  the  transfer  must  have 
been  upon  what  the  law  regards  as  a  valuable  consideration.  These 
principles  admit  of  no  dispute;  and  although,  upon  some  points  of 
commercial  law  in  close  proximity  to  those  I  have  stated,  discordant 
opinions  may  be  found.  Stalker  v.  McDonald,  6  Hill,  93;  Swift 
V.  Tyson,  16  Peters,  1,  there  is  entire  harmony  as  to  those  I  have 
mentioned. 

The  judge  charged  that,  if  the  plaintiffs  received  the  note  in  pay- 
ment and  satisfaction  of  a  debt  due  to  them  from  Hulburt,  the 
maker  of  the  note,  that  was  a  sufficient  consideration  for  its  transfer, 
and  they  thereby  became  purchasers  for  value.  This,  as  a  legal  prop- 
osition, is  not  questioned ;  but  the  bill  of  exceptions  fails  to  show  any 
evidence  to  which  this  principle  could  be  applied.  There  was  no 
proof  which  tended  to  show  that  the  note  had  been  transferred  in 
extinguishment  of  the  debt  of  Hulburt.  The  judge,  therefore,  in 
my  view  of  the  case,  erred  in  submitting  that  question  to  the  jury. 


320  accommodatok's  contract. 

But  I  shall  not  dwell  on  this  point,  for  the  case  may  be  disposed 
of  on  the  question  of  good  faith. 

It  appears  by  the  testimony  of  Hulburt  that  he  was  indebted  to 
the  plaintill's  in  a  sum  exceeding  the  amount  of  this  note,  and  that 
Small,  one  of  the  plaintiffs,  came  to  Vienna,  where  Hulburt  resided, 
to  secure  payment  of  said  debt.  Small  proposed  to  Hulburt  to  give 
a  note  at  one  year  with  security,  and  the  defendant,  who  lived  in  an- 
other county,  was  spoken  of  for  that  purpose.  Small  said  he  would 
take  the  defendant  as  surety,  and  it  was  arranged  that,  while  Small 
was  absent  (as  he  was  going  West  for  a  few  days),  Hulburt  should 
go  to  the  defendant's  residence  in  order  to  obtain  him  as  such  surety. 
Pursuant  to  this  arrangement,  Hulburt  went  to  see  the  defendant, 
and  told  him  what  he  wanted.  At  first  the  defendant  refused  to 
indorse;  but  it  was  finally  agreed  between  them  that  he  would  in- 
dorse the  note  upon  condition  that  one  Austin,  who  then  held  a  note 
given  by  the  defendant,  should  deposit  the  same  with  a  third  person, 
there  to  remain  until  the  defendant  should  be  discharged  from  said 
indorsement.  The  note  in  question  was  accordingly  signed  by  Hul- 
burt and  indorsed  by  the  defendant ;  but  it  was  not  to  be  transferred 
to  Small,  or  used  in  any  manner,  until  the  one  held  by  Austin  had 
been  deposited  under  said  arrangement.  Hulburt  returned  with 
the  note  to  Vienna,  where  Austin  lived,  and  told  him  of  the  arrange- 
ment under  which  the  indorsement  had  been  made.  Austin  declined 
to  comply  with  that  arrangement;  but  Hulburt,  as  he  states,  left 
the  note  in  suit  on  Austin's  table,  and  did  not  see  it  again  until  Small 
had  returned  to  Vienna.  Hulburt  first  saw  Small  after  his  return 
at  Austin's  office,  where,  on  arriving  at  the  office,  according  to  the 
testimony  of  Hulburt,  Small  said  to  him,  "We  have  fixed  that 
matter,  and  Mr.  Austin  has  let  me  have  the  note."  The  witness  then 
inquired  of  Austin,  in  Small's  presence,  in  what  manner  the  note  had 
been  turned  out,  and  whether  the  arrangement  of  the  defendant  had 
been  complied  with,  to  which  Austin  made  no  answer ;  but  Small  said 
he  had  prevailed  on  Mr.  Austin  to  indorse  the  note,  and  he  had  got 
it.  This,  according  to  the  witness  (Hulburt),  was  all  which  passed 
at  that  time.  Another  witness  (Paul),  who  was  present,  said  the 
remark  of  Hulburt  to  Austin  was  that  he  supposed  he  had  not  turned 
out  the  note  without  complying  with  the  request  of  Mr.  Smith,  the 
defendant,  to  which  Austin  made  no  answer;  but  Small  said  he  had 
prevailed  on  Mr.  Austin  to  indorse  the  note,  and  had  released  Mr. 
Smith. 

It  is  not  material  which  of  these  witnesses  was  correct  as  to  the 
form  of  the  remarks  made  at  the  time.  Both  come  to  the  same  result ; 
for  what  was  said,  according  to  the  statement  of  either  witness,  was 
full  notice  to  Small  that  the  indorsement  had  been  procured  upon 
some  arrangement  or  condition  which  had  not  been  complied  with. 
Here,  then.  Small  had  actual  notice  that  the  indorsement  was  condi- 


SMALL   V.   SMITH.  321 

tional;  and,  if  the  note  was  subsequently  transferred  to  him,  he 
would  necessarily  take  it  subject  to  that  condition.  When  this 
notice  was  given,  the  note  was  in  Small's  hands.  He  had  received  it, 
as  he  said,  of  Mr.  Austin.  But  it  cannot  be  pretended  he  had  received 
it  of  Austin  upon  any  consideration  moving  between  them.  Indeed, 
the  first  remark  of  Small  to  Hulburt,  and  all  that  was  said  on  that 
occasion,  goes  to  show  that  whatever  might  have  been  done  by  Austin 
had  been  done  for  Hulburt,  and  not  for  himself,  and  in  furtherance 
of  the  negotiation  which  had  been  commenced  between  Hulburt  and 
Small.  It  is  not  shown  that  Austin  had  authority  from  Hulburt  to 
transfer  this  note  to  Small  on  any  terms,  although  it  may  be  inferred 
that  he  was  authorized  to  do  so,  on  complying  with  the  condition 
upon  which  the  defendant's  indorsement  had  been  made.  Small  did 
not  set  up  that  he  had  received  the  note  as  the  property  of  Austin, 
and  the  whole  transaction  shows  he  did  not.  He  could  not,  therefore, 
upon  the  facts  as  disclosed  by  the  witnesses,  pretend  that  he  had 
acquired  title  to  the  note  in  any  manner  before  he  was  apprised  by 
Hulburt  that  the  indorsement  was  made  on  a  condition  which  had 
not  been  performed.  It  is  more  a  matter  of  inference  than  of  any- 
thing like  direct  proof,  that  Hulburt  at  any  time  assented  to  the 
transfer  of  the  note  to  Small ;  but  if  he  did  so,  after  notice  to  Small 
of  the  condition  on  which  the  indorsement  had  been  made,  it  is  plain 
that  the  plaintiffs  ought  not  to  recover,  as  the  condition  has  never 
been  performed.  If  the  plaintiffs  claim  as  purchasers  of  the  note 
from  Austin,  they  are  met  by  two  objections :  first,  Small,  one  of  the 
plaintiffs,  was  aware  that  the  note  belonged  to  Hulburt.  and  not  to 
Austin;  and,  secondly,  it  is  not  shown  that  the  plaintiffs  paid  or 
advanced  anything  to  Austin,  or  that  any  consideration  passed  be- 
tween them  for  the  transfer  of  the  note.  And  as  to  Hulburt,  if  he 
assented  to  the  transfer  of  the  note  to  Small,  it  was  after  explicit 
notice  that  the  indorsement  was  conditional,  as  is  proved  by  the  testi- 
mony of  both  Paul  and  Hulburt.  Had  the  case  been  put  to  the  jury 
upon  the  point  of  notice,  with  suitable  explanations,  there  is  no  doubt 
what  the  verdict  should  and  would  have  been,  unless  these  witnesses 
were  wholly  discredited.  I  think  the  case  was  not  so  submitted  to 
the  jury,  and  that  it  should  be  sent  back  for  a  new  trial. 

New  trial  granted. 

Note,  —  As  to  what  constitutes  a  fraudulent  diversion  of  the  instrument, 
see  Mohawk  Bank  v.  Corey,  1  Hill,  513 ;  Duncan  v.  Gilbert,  5  Dutch.  521. 


21 


322  accommodator's  contract. 

CHESTER   V.   DORR. 

Court  of  Appeals  of  New  York,  December,  1869.     41  N.  Y.  279. 

Nor  to  a  holder  who  purchased  after  the  maturity  of  the  instrument,  that  ia,  after 
the  expiration  of  the  time  during  which  the  accommodation  was  to  run. 

Action  by  the  holder  (begun  against  an  indorser,  but  now  con- 
tinued) against  the  executors  of  an  indorser  of  several  negotiable 
promissory  notes.  The  defendant's  testator  had  indorsed  the  notes 
at  the  request  and  for  the  accommodation,  without  value,  of  one 
Myers,  who  held  them  at  maturity.  Holding  the  notes,  unpaid,  for 
two  or  three  years  after  they  became  due,  Myers  now  transferred 
them  for  full  value  to  the  plaintiff's  assignor.  Verdict,  under  direc- 
tion, for  defendant;  appeal;  report  of  referee  in  favor  of  plaintiff, 
affirmed  on  appeal  by  the  General  Term,  Superior  Court  of  New 
York.    Appeal. 

[Argument  not  reported.]  ^ 

Woodruff,  J.  Mr.  Justice  Story,  in  his  Treatise  on  Promissory 
Notes,  §  178,  thus  states  the  difference  between  the  legal  effect  of  a 
promissory  note  before  and  after  maturity:  "  If  the  transfer  is  made 
before  the  maturity  of  the  note  to  a  bona  fide  holder  for  a  valuable 
consideration,  he  will  take  it  free  of  all  equities  between  the  ante- 
cedent parties  of  which  he  had  notice.  If  the  transfer  is  after  the 
maturity  of  the  note,  the  holder  takes  it  as  a  dishonored  note,  and  is 
affected  by  all  the  equities  between  the  original  parties,  whether  he 
has  any  notice  thereof  or  not.^  But  ...  it  is  not  to  be  understood  by 
this  expression  that  all  sorts  of  equities  existing  between  the  parties, 
from  other  independent  transactions  between  them,  are  intended ;  but 
only  such  equities  as  attach  to  the  particular  note,  and  as  between 
those  parties,  would  be  available  to  control,  qualify,  or  extinguish 
any  rights  arising  thereon." 

The  learned  author  gives  this  as  the  final  conclusion  from  the 
numerous  cases  cited  by  him,  an  examination  of  which  shows  that  it 
is  only  after  some  difference  of  opinion  that  it  has  come  to  be  deemed 
settled.  Or,  as  Mr.  Chitty  says,  of  the  opinion  of  Buller  and  Ash- 
hurst,  JJ.,  in  Brown  v.  Davis,  3  T.  R.  80,  expressed  when  Lord 
Kenyon  doubted  its  broad  extent,  "this  latter  opinion  is  now  the 
law."  That  opinion  was  to  the  effect  "  that  where  a  note  is  overdue, 
that  alone  is  such  a  suspicious  circumstance  as  makes  it  incumbent  on 

1  This  form  of  expression  would  hardly  be  used  at  the  present  day.  "  Notice  " 
here  is  used  in  the  sense  of  knowledge.  Taking  after  maturity  is  now  considered 
taking  with  notice,  —  notice  absolute  of  equities  if  any  exist.  Bigelow,  Bills  and 
Notes,  233,  234. 


CHESTER   V.   DORR.  '  323 

the  party  receiving  it  to  satisfy  himself  that  it  is  a  good  one,  other- 
wise much  mischief  might  arise."  "  If  a  note  indorsed  be  not  due  at 
the  time,  it  carries  no  suspicion  whatever  on  the  face  of  it,  and  the 
party  receives  it  on  its  own  intrinsic  credit.  But  if  it  is  overdue, 
though  I  do  not  say  that  by  law  it  is  not  negotiable,  yet  certainly  it  i3 
out  of  the  common  course  of  dealing,  and  does  give  rise  to  suspicion. 
.  .  .  Generally  when  a  note  is  due,  the  party  receiving  it  takes  it  on 
the  credit  of  the  person  who  gives  it  to  him." 

The  foundation  of  the  rule  which  distinguished  commercial  paper 
from  ordinary  commercial-law  choses  in  action  is  in  harmony  with 
the  law  thus  stated.  The  holder  of  the  former  is  protected  against 
any  inquiry  into  its  previous  history,  and  is  warranted  in  giving  it 
full  faith,  according  to  its  tenor,  because  commercial  convenience 
and  the  importance  of  the  free  and  unembarrassed  use  of  commer- 
cial credits  require  it;  and  on  this  the  mercantile  customs,  which 
ripened  into  the  law  merchant,  were  founded.  These  reasons,  how- 
ever, could  have  no  application  to  paper  which  had  been  dishonored. 
The  credit  it  was  adapted  to  invite  is  spent,  and  the  very  fact  of  dis- 
honor is  inconsistent  with  the  purposes  which  the  rule  was  intended 
to  subserve. 

The  rule  is  simple  and  convenient  of  application,  is  in  no  sense 
inconsistent  with  the  usefulness  of  negotiable  paper  for  the  purposes 
for  which  it  is  intended,  and,  as  it  seems  to  me,  is  a  just  security 
against  mischief  and  fraud.  In  the  terms  in  which  it  is  above  stated 
it  includes  the  defence  of  want  of  consideration,  whenever  that  ren- 
ders the  note  invalid  in  the  hands  of  him  who  holds  it  when  it  be- 
comes due.  Such  want  of  consideration  is  an  inherent  defect  in  the 
contract  itself;  or,  in  the  language  of  the  rule,  attaches  to  the  note 
itself,  in  the  hands  of  one  for  whose  accommodation  a  note  is  made, 
and  does  not,  like  a  set-off  or  other  collateral  matter  apart  from  the 
note,  arise  out  of  an  independent  transaction. 

But  the  same  learned  writer  above  referred  to  states  that  the  mere 
fact  that  an  accommodation  note  has  been  indorsed  after  it  became 
due,  does  not  of  itself,  without  some  other  equity  in  the  maker,  de- 
feat a  recovery  by  the  indorsee.  Story,  §  194.  And  Mr.  Chitty  states 
that  it  has  been  so  decided.  The  cases  of  Charles  v.  Marsden, 
1  Taunt.  224,  Sturtevant  v.  Ford,  4  Man.  &  G.  101,  4  Scott,  608,  and 
Caruthers  v.  West,  11  Q.  B.  143,  are  in  support  of  the  proposition. 
These  are  the  cases  upon  the  authority  of  which  the  present  case  was 
decided  below. 

I  am  constrained  to  say  that  I  am  not  satisfied  that  such  an  excep- 
tion to  the  rule  is  either  just  or  called  for  by  any  principle,  nor  am 
I  at  all  convinced  by  the  reasons  assigned  for  the  exception. 

That  the  maker  or  indorser  of  a  note  for  the  accommodation  of 
another  should  be  held  to  the  terms  of  his  own  indorsement,  according 
to  their  just  interpretation,  I  fully  agree.     That  one  who  receives 


324  accommodator's  contract. 

such  paper  before  maturity  should  not  be  affected  by  the  mere  fact 
that  it  was  made  or  indorsed  without  consideration  I  equally  agree. 
That  when  a  party  lends  his  note  or  indorsement  to  another  without 
restriction  as  to  its  use  he  authorizes  the  negotiation  thereof,  in  any 
manner  which  may  serve  the  convenience  or  credit  of  the  borrower, 
may  be  conceded. 

From  this  latter  concession  it  is  argued  that  such  a  lending  of  one's 
name  is  furnishing  a  continuing  guaranty  of  the  payment  of  the  note, 
irrespective  of  its  terms  as  to  time  of  payment,  and  is  therefore  bind- 
ing whenever  it  is  transferred  and  however  long  after  it  has  become 
payable  and  been  dishonored.  That  the  absence  of  express  restric- 
tion warrants  the  inference  that  the  making  or  indorsement  was  to 
enable  the  borrower  to  use  it  whenever  thereafter  it  suited  his  pleas- 
ure, and  so  "  enforcing  its  payment  is  in  accordance  with  the  object 
for  which  the  note  was,  as  matter  of  accommodation,  made  or  in- 
dorsed;" and  in  the  discussion  in  England  it  has  been  suggested 
that,  supposing  an  accommodation  acceptance  to  remain  in  the  hands 
of  the  party  accommodated,  it  may  be  treated  as  giving  authority  by 
implication  to  use  it  thereafter  as  his  convenience  or  needs  may 
require. 

In  respect  to  the  last  suggestion  two  observations  are  pertinent; 
first,  it  begs  the  question,  for  assuming  the  rule  to  be  that  he  who 
receives  a  note  or  bill  after  dishonor  acquires  no  better  title  to  recover 
thereon  than  he  has  from  whom  it  was  received,  then  there  is  no 
reason  why  the  accommodation  maker  or  indorser  should  not  treat 
the  note  in  the  hands  of  the  borrower,  after  maturity,  as  functus 
officio,  and  mere  waste  paper.  And  second,  how  is  the  maker  or  in- 
dorser in  such  case  to  withdraw  his  note  or  indorsement?  Is  he  to 
be  driven  into  a  court  of  equity,  and  to  praying  out  an  injunction, 
to  prevent  a  subsequent  transfer?  I  think  not.  Take  the  present 
case;  the  note  itself  was  the  property  of  the  holder  at  its  maturity 
(Myers),  and  was  a  valid  note  in  his  favor  against  the  maker.  The 
indorsement  of  the  defendant  (the  appellant's  testator)  was  material 
as  a  transfer  of  title,  although,  being  made  for  Myers's  accommoda- 
tion, it  could  not  be  enforced  against  such  defendant  as  indorser. 
I  cannot  agree  that  it  was  incumbent  on  the  defendant  to  go  into  a 
Court  of  Chancery  to  compel  Myers  to  suffer  a  writing  of  the  words 
"  without  recourse  "  or  an  equivalent  expression  as  a  qualification  of 
such  indorsement. 

As  to  the  other  reason,  it  is  even  less  satisfactory,  because  it  pro- 
ceeds, I  think,  upon  an  entire  misconstruction  of  the  act  of  making 
or  indorsing  a  note  for  the  accommodation  of  another.  Its  purpose 
and  object  is  to  obtain  credit  for  such  other,  or  to  enable  him  to  do 
60.  The  very  terms  of  the  note  declare  the  credit  it  is  intended  to 
procure,  that  is  to  say,  until  the  maturity  of  the  note.  Within  that 
range  the  making  or  indorsement  being  unrestricted  as  to  its  use,  the 


CHESTER   V.   DOER.  325 

borrower  may  use  it  as  his  exigencies  require,  and  a  transferee  may 
receive  it  in  reliance  upon  the  undertaking  which  is  imported  by  ita 
terms. 

But  the  very  term  of  payment  contained  in  the  note  imports  that 
the  accommodation  party  undertakes  that  the  note  shall  be  paid  at 
its  maturity,  and  that  he  who  then  holds  the  note  shall  have  recourse 
to  him,  if  it  be  not  then  paid.  Where  the  accommodation  (as  in  the 
present  case)  is  by  indorsement,  that  is  the  precise  contract,  viz., 
that  the  note  shall  be  paid  at  maturity,  and  not  that  it  shall  be  paid 
at  any  future  time.  If  the  note  be  not  paid  at  maturity,  the  contract 
is  broken,  and  if  he  who  then  holds  it  can  recover  thereon,  then  his 
right  of  recovery  may  be  transferred  to  another;  and  the  recovery 
of  the  latter  will  be,  not  because  the  accommodation  indorser  under- 
took that  the  note  should  be  paid  to  him,  or  should  be  paid  at  some 
date  after  it  was  due,  but  because  a  valid  cause  of  action,  existing  in 
favor  of  the  holder  at  maturity,  has  been  transferred  to  him. 

It  is  not  according  to  the  intent  or  meaning  of  an  indorsement  for 
another's  accommodation  to  say  that  the  indorser  intends  to  give 
the  use  of  his  credit  for  any  other  period  than  that  limited  in  the 
note,  or  that  such  an  indorsement  imparts  authority  to  use  it  when 
that  period  has  elapsed. 

One  may  be  willing  by  indorsement  to  guaranty  the  solvency  of 
another  for  sixty  days,  or  for  six  months,  and  yet  he  would  wholly 
refuse  to  do  so  for  a  period  of  two  years.  And  accordingly,  when 
such  accommodation  is  given,  it  is  a  most  material  circumstance 
that  the  time  during  which  the  borrower  is  at  liberty  to  obtain 
credit  on  the  note  is  fixed  by  the  limitation  of  the  time  of  payment 
therein. 

I  deem  the  just  view  of  the  subject  to  be  that,  when  a  note  has 
become  due  and  is  dishonored,  the  rights  and  responsibilities  of 
the  parties  thereto  are  fixed.  The  note  then  loses  the  chief  attribute 
of  commercial  paper.  It  is  no  longer  adapted  to  the  uses  and  purposes 
for  which  such  paper  is  made,  and  in  respect  of  which  it  is  important 
that  it  should  circulate  freely.  And  thereafter  he  who  takes  it  takes 
it  with  knowledge  of  its  dishonor,  with  obvious  reason  to  believe 
that  there  exists  some  reason  why  it  was  not  paid  to  the  holder; 
and  takes  it  with  just  such  right  to  enforce  it  as  such  holder  him- 
self has,  and  no  other. 

In  thus  stating  my  views  I  am  not  insensible  of  the  apparent 
authority  for  the  decision  made  below;  but  I  am  also  aware  that 
the  judges  in  England  have  not  been  at  all  agreed  on  the  subject, 
and  have  expressed  doubt  of  the  correctness  of  the  decision  in  Charles 
V.  Marsden,  upon  which  the  other  two  cases  above  referred  to  were 
decided.  The  cases,  largely  collected  in  the  notes  to  Chitty  in  the 
recent  edition,  warrant,  I  think,  the  dissatisfaction  I  have  expressed. 

No  case  in  this  State  has  called  for  a  decision  of  the  question; 


326  accommodator's  contract. 

and  yet  in  Brown  v.  Mott,  7  Johns.  361,  and  in  Grant  v.  Ellicott, 
7  Wend.  227,  the  case  of  Charles  v.  Marsden  is  referred  to  without 
disapprobation,  and  the  proposition  derived  therefrom  is  stated;  but 
in  neither  was  the  point  now  raised  before  the  court,  for  in  neither 
did  it  appear  that  the  plaintiff  took  the  note  after  it  became  due. 
And  that  in  other  States  in  this  country  such  an  exception  to  the 
general  rule  first  above  stated  is  repudiated,  see  Brown  v.  Hastings, 
36  Penn.  St.  285;  Britton  v.  Bishop,  11  Vt.  70;  Odiome  v.  Howard, 
10  N.  H.  343;  Cummings  v.  Little,  45  Maine,  183;^  Vinton  v. 
King,  4  Allen,  563 ;  ^  Kellogg  v.  Barton,  12  Allen,  527.  And  the 
general  proposition  that  he  who  takes  a  note  when  overdue  takes 
it  subject  to  all  defences  inherent  in  the  note,  or  arising  out  of  any 
agreement  with  the  holder,  expressed  or  implied,  and  relating  thereto, 
or,  in  another  form,  that  such  an  indorsee  obtains  no  greater  or 
other  rights  than  his  indorser  had  in  it  at  the  time  of  the  indorsement, 
has  been  stated  as  law  in  cases  almost  without  number. 

It  will  perhaps  suffice  to  refer  to  two  from  the  Supreme  Court 
of  the  United  States.  Andrews  v.  Pond,  13  Pet.  79,  says  of  the 
indorsee  of  a  dishonored  bill :  "  If  he  chooses  to  receive  it,  he  takes 
it  with  all  the  infirmities  belonging  to  it,  and  is  in  no  better  condi- 
tion than  the  person  from  whom  he  received  it."  Fowler  v.  Brantley, 
14  Pet.  321  [says]  :  "A  note  overdue  or  bill  dishonored  is  a  circum- 
stance of  suspicion  to  put  those  dealing  for  it  afterward  on  their 
guard,  and  in  whose  hands  it  is  open  to  the  same  defences  as  it  was 
in  the  hands  of  the  holder  when  it  fell  due.  After  maturity  such 
paper  cannot  be  negotiable  in  the  due  course  of  trade,  although 
Btill  assignable."     See  also  Foley  v.  Smith,  6  Wall.  492. 

In  my  opinion  the  just  rule,  and  the  rule  resting  on  the  soundest 
principle,  requires  us  to  reverse.  The  supposed  exception  to  the 
general  rule  rests  on  neither  reason  nor,  as  I  think,  on  authority, 
certainly  not  in  this  country. 

Five  other  judges  for  reversal;    two  judges  dissented. 

Judgment  reversed. 

Note.  —  There  are  many  authorities  contrary  to  the  doctrine  of  the  princi- 
pal case,  and  holding  that,  where  the  instrument  is  negotiated  when  overdue, 
the  accommodation  party  will  be  liable  according  to  his  contract,  unless  he  is 
discharged  for  want  of  notice  of  dishonor,  in  case  he  is  a  drawer  or  indorser, 
or  unless  the  instrument  has  been  fraudulently  diverted  from  the  purpose  for 
which  the  accommodation  was  given ;  and  the  only  effect  given  to  the  fact 
that  the  paper  was  overdue  when  transferred,  is  to  fix  the  holder  with  notice  of 
Buch  fraudulent  use,  if  any.  Dunn  v.  Weston,  71  Me.  270;  Daniel  on  Neg. 
Insts.  §  786  aud  note  (74).     These  authorities  deny  that  the  accommodation 

*  But  see  Dunn  v.  Weston,  71  Me.  270,  infra,  note. 

*  Ante,  p.  239. 


CHESTER  V.  DORR.  327 

party  has  limited  the  period  of  accommodation  to  that  before  the  maturity  of 
the  paper,  unless  he  has  done  so  by  agreement  with  the  accommodated  party, 
in  which  case  he  may  defend  against  the  purchaser  after  maturity.  Dunn  v. 
Weston,  71  Me.  270,  274,  and  cases  cited. 

Massachusetts  and  Pennsylvania  follow  the  doctrine  of  Chester  v.   Dorr, 
supra;  Peale  v.  Addicks,  174  Pa.  St.  549;  Kellogg  v.  Barton,  12  AUen,  527. 


328  assurek's  contract. 


CHAPTER   X. 

assurer's  contract. 


MOSES   V.   LAWEENCE    COUNTY   BANK. 

Supreme  Court  of  the  United  States,  October,  1892.     149  U.  S.  298. 

Guaranty  of  the  payment  of  a  promissory  note  made  thereon  on  a  day  subsequent 
to  the  delivery  of  the  note,  requires  a  distinct  consideration,  and  in  Alabama  a  distinct 
expression  of  the  same  in  writing.^    Aliter  if  note  aud  guaranty  are  contemporaneous. 

Action  upon  a  guaranty  of  a  negotiable  promissory  note  made 
by  and  payable  to  the  order  of  Sheffield  Furnace  Company;  the 
guaranty  being  in  the  following  words  written  upon  the  note  and 
signed :  "  We  hereby  guaranty  the  payment  of  the  note  at  maturity." 
It  was  alleged  in  the  complaint  that  the  guaranty  was  made  for 
valuable  consideration;  that  the  note  with  the  guaranty  thereon 
was  indorsed  by  the  payee,  for  value,  to  the  order  of  J.  P.  Witherow, 
before  maturity,  and  before  maturity  indorsed  and  transferred  for 
value  by  Witherow  to  the  plaintiff;  and  that  the  defendants  waived 
protest  and  notice. 

The  note  was  made  and  was  payable  in  Alabama,  a  statute  of 
which  provides  that  a  special  agreement  to  answer  for  the  debt  of 
another  is  void  "  unless  such  agreement  or  some  note  or  memorandum 
thereof,  expressing  the  consideration,"  is  in  writing.  The  defendant 
pleaded,  inter  alia: 

Fourth.  That  the  guaranty  sued  on  was  a  special  promise  to 
answer  for  the  debt  of  another,  and  did  not  express  any  considera- 
tion for  the  promise. 

Fifth.  That  the  note  was  given  by  the  Sheffield  Furnace  Company 
for  a  debt  owing  to  Witherow  before  it  was  made,  and  was  not 
founded  upon  a  consideration  paid  or  liability  accrued  at  the  time 
of  the  making  thereof,  and  the  guaranty  was  without  any  consid- 
eration. 

Eighth.  That  the  Sheffield  Furnace  Company  paid  the  debt  sued 
on  to  Witherow  before  this  action  was  commenced. 

Twelfth.  That  the  guaranty  sued  on  was  a  special  promise  to 
answer  for  the  debt  of  another,  and  did  not  express  any  consideration 

1  In  many  States,  no  statement  of  the  consideration  is  required  by  the  Statute  of 
Frauds.    See  Rev.  Laws  of  Mass.  ch.  74,  §  2. 


MOSES  V.    LAWRENCE   COU.NTY   BANK.  329 

therefor,  and  was  not  executed  contemporaneously  with,  nor  before 
the  negotiation  of,  the  note  of  which  it  guarantied  the  pa}Tnent. 

The  plaintiff  demurred  to  the  fourth  and  fifth  pleas,  because  they 
did  not  deny  that  the  defendants  indorsed  the  guaranty  upon  the 
note'  contemporaneously  with  its  execution  and  before  any  negotia- 
tion thereof;  and  also  demurred  to  these  pleas,  as  well  as  to  the 
twelfth  plea,  because  they  did  not  deny  that  the  defendants  indorsed 
the  guaranty  upon  the  note  before  its  negotiation  to  the  plaintiff, 
and  in  order  to  give  it  credit  and  currency,  nor  allege  that  the  plain- 
tiff had  notice  of  any  want  of  consideration  for  the  guaranty. 

To  the  eighth  plea  a  replication  was  filed,  alleging  that  the  plain- 
tiff became  the  owner  of  the  note  for  a  valuable  consideration  before 
maturit}^,  and  that  no  part  thereof  had  ever  been  paid  to  the  plain- 
tiff or  to  any  one  authorized  by  the  plaintiff  to  receive  it.  To  this 
replication  the  defendant  demurred. 

The  court  below  sustained  the  demurrers  to  the  pleas,  and  over- 
ruled the  demurrer  to  the  replication. 

Issue  was  then  joined  on  the  eighth  plea  and  the  replication 
thereto;  and  a  trial  by  jury  was  had  upon  that  issue,  at  which  the 
plaintiff  gave  in  evidence  the  note  with  the  indorsements  and  the 
guaranty  thereon. 

Verdict  for  the  plaintiff,  by  direction  of  the  court.  Exceptions 
and  writ  of  error  taken. 

[Argument  reported.] 

Gray,  J.  By  the  Statute  of  Frauds  of  Alabama  a  special  promise 
to  answer  for  the  debt,  default,  or  miscarriage  of  another  is  void 
"unless  such  agreement,  or  some  note  or  memorandum  thereof,  ex- 
pressing the  consideration  "  is  in  writing  and  subscribed  by  or  in 
behalf  of  the  party  to  be  charged.  Alabama  Code  of  1887,  §  1732. 
The  words  "  value  received,"  or  acknowledging  the  receipt  of  one 
dollar,  sufficiently  express  a  consideration.  Neal  v.  Smith,  5  Ala. 
568;    Boiling  v.'Munchus,  65  Ala.  558. 

Every  negotiable  promissory  note,  even  if  not  purporting  to  be 
"  for  value  received,"  imports  a  consideration.  Mandeville  v.  Welch, 
5  Wheat.  277;  Page  v.  Bank  of  Alexandria,  7  Wheat.  35;  Townsend 
V.  Derby,  3  Met.  363.  And  the  indorsement  of  such  a  note  is  itself 
prima  facie  evidence  of  having  been  made  for  value.  Eiddle  v. 
Mandeville,  5  Cranch,  322,  332. 

The  promissory  note  in  the  case  at  bar,  having  been  made  payable 
to  the  maker's  own  order,  first  took  effect  as  a  contract  upon  its 
indorsement  and  delivery  by  the  maker,  the  Sheffield  Furnace  Com- 
pany, to  Witherow,  the  first  taker.  Lea  v.  Branch  Bank,  8  Porter, 
119;  Little  v.  Rogers,  1  Met.  108;  Hooper  v.  Williams,  2  Exch. 
13 ;   Brown  v.  DeWinton,  6  C.  B.  336. 


330  assurer's  contract. 

A  guaranty  of  the  payment  of  a  negotiable  promissory  note,  writ- 
ten by  a  third  person  upon  the  note  before  its  delivery,  requires  no 
other  consideration  to  support  it,  and  need  express  none  other  (even 
where  the  law  requires  the  consideration  of  the  guaranty  to  be  ex- 
pressed in  writing),  than  the  consideration  which  the  note  upon  its 
face  implies  to  have  passed  between  the  original  parties.  Leonard 
V.  Vredenburgh,  8  Johns.  29;  DeWolf  v.  Eabaud,  1  Pet.  476,  501, 
502 ;  Nelson  v.  Boynton,  3  Met.  396,  400,  401 ;  Bickford  v.  Gibbs, 
8  Cush.  154;  Nabb  v.  Koontz,  17  Md.  283;  Parkhurst  v.  Vail,  73 
111.  343. 

The  demurrers  to  the  fourth  and  fifth  pleas  therefore  were  rightly 
sustained. 

But  a  guaranty  written  upon  a  promissory  note  after  the  note 
has  been  delivered  and  taken  effect  as  a  contract  requires  a  distinct 
consideration  to  support  it;  and  if  such  a  guaranty  does  not  ex- 
press any  consideration  it  is  void,  where  the  Statute  of  Frauds,  as 
in  Alabama,  requires  the  consideration  to  be  expressed  in  writing. 
Leonard  v.  Vredenburgh,  and  other  cases  above  cited;  Rigby  v. 
Norwood,  34  Ala.  129. 

The  demurrer  to  the  twelfth  plea,  therefore,  should  have  been 
overruled  and  judgment  rendered  thereon  for  the  defendant,  un- 
less the  court  saw  fit  to  permit  the  plaintiff  to  file  a  replication  to 
that  plea. 

It  was  argued  on  behalf  of  the  original  plaintiff  that  the  validity 
and  effect  of  the  guaranty  must  be  governed  by  the  general  com- 
mercial law,  without  regard  to  any  statute  of  Alabama.  But  there 
can  be  no  doubt  that  the  Statute  of  Frauds,  even  as  applied  to  com- 
mercial instruments,  is  such  a  law  of  the  State  as  has  been  declared 
by  Congress  to  be  a  rule  of  decision  in  the  courts  of  the  United 
States.  Act  of  September  24,  1789,  c.  20,  §  34,  1  Stat.  92;  Eev. 
Stat.  §  721 ;  Mandeville  v.  Riddle,  1  Cranch,  290,  and  5  Cranch, 
322 ;  DeWolf  v.  Rabaud,  1  Pet.  476 ;  Kirkman  v.  Hamilton,  6  Pet. 
20;  Brashear  v.  West,  7  Pet.  608;  Paine  v.  Central  Vermont  Rd., 
118  U.  S.  152,  161. 

The  eighth  plea  was  payment.  The  defendant  introduced  no 
evidence  to  support  this  plea,  and  has  therefore  no  ground  of  excep- 
tion to  the  rulings  and  instructions  at  the  trial  of  the  issue  joined 
thereon. 

But  the  erroneous  ruling  on  the  demurrer  to  the  twelfth  plea 
requires  the  judgment  to  be  reversed  and  the  case  remanded  to  the 
Circuit  Court  for  further  proceedings  in  conformity  with  this  opinion. 


THE   PRESIDENT,   ETC.   OF   THE   OXFORD   BANK  V.   HAYNES.      331 

THE   PEESIDENT,  ETC.   OF   THE   OXFOED   BANK  v. 

HAYNES. 

Supreme  Court  of  Massachusetts,  September,  1829.     8  Pick.  423. 

A  guaranty  is  a  conditional  undertaking,  and  the  guarantor  is  liable  only  upon 
default  of  the  principal  debtor,  and  he  is  entitled  to  notice  of  such  default,  where 
a  failure  to  give  hinj  notice  would  cause  a  loss  to  him.  A  surety  is  an  original 
promisor,  primarily  liable. 

Assumpsit  upon  a  promissory  note,  dated  on  October  9,  1823,  for 
$1000,  payable  to  the  Oxford  Bank  in  sixty  days  and  grace. 

On  a  case  stated  it  appeared,  that  the  note  was  made  by  Alpheus 
Smith  and  James  Anderton  as  principal  and  surety,  jointly  and 
severally,  and  was  offered  at  the  bank  for  discount;  but  the  bank 
refused  to  discount  it,  and  the  cashier  wrote  on  the  back  of  it  the 
words,  "  I  guaranty  the  paj^ment  of  the  within  note,"  to  which 
Smith  procured  the  signature  of  the  defendant.  The  note  was  then 
discounted  at  the  bank,  and  the  amount  thereof  was  paid  to  Smith. 
A  payment  of  $250  was  made  by  Smith  at  the  maturity  of  the  note, 
about  the  1st  of  December,  1823,  and  no  notice  of  the  non-payment 
of  the  residue  was  given  to  the  defendant.  The  note  so  remained 
until  October  7,  1824,  when  an  action  was  commenced  upon  it 
against  Smith,  and  one  Southgate  was  summoned  as  his  trustee. 
Judgment  was  rendered  in  that  action  in  March,  1825,  and  South- 
gate  paid  on  the  judgment  the  amount  in  his  hands,  being  $535 ; 
and  nothing  has  been  paid  upon  the  note  or  judgment  since.  Smith 
and  Anderton  were  reputed  to  be  men  of  property  at  the  time  of  mak- 
ing the  note  and  so  continued  until  the  time  of  their  failures.  Smith 
failed  about  the  23d  of  January,  1824,  and  Anderton  in  February 
following,  each  being  possessed  of  visible  and  attachable  property 
much  exceeding  the  amount  of  the  note,  and  which  was  attached  and 
levied  on  by  their  other  creditors.  Since  their  failures  they  have 
continued  insolvent. 

Smith  lived  about  ten  miles  from  the  Oxford  Bank  and  in  the 
same  village  with  Haynes,  at  the  date  and  maturity  of  the  note. 
Anderton  lived  between  this  village  and  the  bank,  and  about  six 
miles  from  the  bank. 

On  the  7th  of  October,  1824,  the  directors  of  the  bank  chose  a 
committee  to  go  to  Leicester  to  effect  an  adjustment  of  the  affair, 
and  notice  was  then  given  to  Haynes  that  the  note  had  not  been  paid. 
Haynes  had  never  given  the  plaintiffs  notice  of  the  failure  of  Smith 
and  Anderton,  nor  requested  the  plaintiffs  to  collect  the  note.  Both 
Smith  and  Anderton,  previous  to  their  failures,  were  in  the  habit 
of  doing  business  at  the  Oxford  Bank. 

The  plaintiffs  were  to  become  nonsuit  or  the  defendant  to  be  de- 
faulted, according  as  the  court  should  order. 


332  assurek's  contra.ct. 

The  declaration  contained  two  counts ;  one  charging  the  defendant 
as  an  original  promisor,  the  other  as  a  guarantee. 

[Argument  reported.] 

Parker,  C.  J.  ...  It  is  very  clear  from  the  facts  stated,  that  the 
bank  might  easily  have  secured  the  amount  of  the  note,  had  they 
attempted  to  do  it  when  it  became  payable,  or  within  a  month 
afterwards ;  and  that  Haynes,  the  defendant,  had  he  been  seasonably 
called  upon  and  been  notified  of  the  non-payment  of  the  note,  might 
without  difficulty  have  obtained  security  from  the  property  of  either 
or  both  of  the  promisors.  Had  he  been  an  indorser  of  the  note,  most 
clearly  by  the  above  facts  he  would  have  been  discharged,  not  only 
because  the  condition  of  giving  notice  was  not  strictly  complied 
with,  but  because  there  was  gross  negligence  on  the  part  of  the  bank, 
and  a  new  credit  given  to  the  promisors  without  the  consent  of  the 
indorser. 

Haj^nes  therefore  cannot  be  liable  unless  by  the  form  of  his  con- 
tract he  became  answerable  at  all  events,  and  unconditionally,  for 
the  payment  of  the  note.  And  it  is  contended  that  this  is  the  legal 
effect  of  the  contract  of  guarantee  into  which  he  entered. 

It  is  somewhat  extraordinary,  that  the  nature  of  this  contract, 
and  the  extent  of  the  liability  it  creates,  are  not  very  clearly  settled 
in  the  books.  It  has  been  sometimes  held  to  be  an  absolute,  sometimes 
a  conditional  obligation.  Sometimes  a  guarantee  has  been  deemed 
a  surety,  and  at  others,  not  more  than  an  indorser.  And  this  per- 
haps has  arisen  from  the  different  forms  in  which  the  contract  has 
been  made.  In  several  cases,  where  the  party  put  his  name  on  the 
back  of  the  note,  without  any  words  written  over  it  at  the  time, 
he  not  being  the  payee  of  the  note,  he  has  been  charged  as  an  original 
promisor,  being  considered  in  the  light  of  a  surety,  and  he  has  been 
declared  against  as  such;  but  in  these  cases  his  signature  was  given 
at  the  time  of  making  the  note,  or  in  so  short  a  time  afterwards, 
and  under  such  circumstances,  as  to  have  relation  to  the  making  of 
the  contract  originally.  The  case  of  Josselyn  v.  Ames,  3  Mass.  274, 
is  of  the  first  class,  and  that  of  Moies  v.  Bird,  11  Mass.  436,  of  the 
second.  In  other  cases,  the  signature  of  a  third  party,  not  named  in 
the  note,  has  been  given  a  long  time  after  the  making  of  the  note, 
and  without  any  circumstances  showing  that  the  third  party  had  any 
concern  in  the  original  contract.  Such  was  the  case  of  TJlen  v. 
Kittredge,  7  Mass.  233. 

In  the  first  class  of  cases,  the  holder  of  the  note  has  been  allowed 
to  treat  the  person  whose  name  is  on  the  back,  as  a  surety  or 
original  promisor,  without  any  proof  of  consideration,  other  than 
as  against  the  person  who  signed  his  name  under  the  note,  or  of 
any  actual  promise  on  his  part  to  pay,  except  what  is  derived  from 


THE  PRESIDENT,  ETC.   OF  THE   OXFORD   BANK   V.   HAYNES.      333 

his  signature  to  the  note.  In  the  second  class  of  cases,  proof  has  been 
required  of  the  promise  or  engagement  to  become  liable,  and  he  is 
to  be  charged  in  no  other  form  than  is  consistent  with  that  engage- 
ment ;  and  it  being  a  collateral  engagement  to  pay  the  debt  of  another, 
there  must  be  proof  of  a  consideration  for  the  promise.  The  dis- 
tinction is  clearly  stated  in  the  case  of  Hunt  v.  Adams,  5  Mass. 
361. 

But  the  cases  above  cited  where  the  party  signing  on  the  back  of 
the  note  has  been  held  to  be  an  original  promisor,  are  where  the 
signature  is  in  blank,  and  not  where  a  special  undertaking  is  written 
over  it.^  In  such  cases  the  party  chargeable,  the  note  being  nego- 
tiable, gives  authority  to  the  payee  or  holder  to  write  over  his  sig- 
nature such  words  as  will  bind  him  to  the  payment,  not  as  indorser, 
for  he  cannot  be  such  technically  to  a  note  not  negotiable,  but  as 
a  promisor,  surety,  or  guarantee,  at  his  election.  No  such  authority 
exists,  where  the  tenor  and  form  of  the  undertaking  are  already 
drawn  out  before  the  signature  of  the  party. 

In  the  case  before  us,  the  signature  of  the  defendant  was  not  in 
blank,  but  under  the  words  written  by  the  cashier,  the  agent  of  the 
plaintiffs,  which  import  a  guarantee  only.  This  is  the  only  char- 
acter in  which  he  can  be  made  liable,  and  if  by  law  a  guarantee  is 
not  an  original  promisor,  he  cannot  be  sued  as  such. 

We  therefore  must  consider  what  is  the  liability  of  a  guarantee 
upon  a  promissor}''  note;  whether  he  is  h'able  at  all  events,  or  only 
upon  condition;  and  if  the  latter,  whether  the  condition  has  been 
here  performed. 

This  is  the  point  which  we  think  is  undecided  in  this  Common- 
wealth, though  there  have  been  many  allusions  to  it  in  cases  such 
as  have  been  mentioned,  in  which  the  question  was  in  relation  to 
the  liability  of  a  surety,  or  of  one  who  put  his  name  on  a  note  not 
negotiable,  or  where  the  party  so  putting  his  name  had  no  authority 
to  assign,  not  being  the  payee.  But  no  case,  in  which  the  contract 
was  in  terms  a  guarantee,  and  so  intended  by  the  parties,  has  been 
presented  to  the  court.  That  a  guarantee  differs  in  character  from  a 
surety  cannot  be  questioned,  for  he  cannot  be  sued  as  promisor,  as 
the  surety  may;  his  contract  must  be  specially  set  forth.  That  he 
differs  from  an  indorser  is  equally  clear,  and  for  the  same  reason; 
and  also  because  he  warrants  the  solvency  of  the  promisor,  which 
the  indorser  does  not,  he  being  answerable  on  a  strict  compliance 
with  the  law  by  the  holder,  whether  the  promisor  is  solvent  or  not. 
There  are  cases  which  adopt  a  distinction  which  is  reasonable  and 
just,  in  which  the  guarantee  is  discharged  only  by  the  joint  effect 
of  negligence  on  the  part  of  the  holder,  and  an  actual  loss  or  preju- 
dice to  the  guarantee  in  consequence  of  that  negligence.  It  is  cer- 
tainly conformable  to  the  general  principles  of  right  and  justice, 
*  See  Union  Bank  v.  "Willis,  8  Met.  504,  ante,  p.  73 ;  changed  by  N.  I.  L.  §  81. 


334  assurer's  contract. 

that  the  creditor  who  knows  of  the  delinquency  of  his  debtor,  and 
withholds  information  of  it  from  the  guarantee,  by  reason  of  which 
the  debt  is  actually  lost,  when  it  might  have  been  saved  by  cither, 
should  not  throw  the  loss  upon  the  guarantee.  It  is  contrary  to  the 
general  principles  of  equity  upon  which  the  law  of  contracts  is 
considered  to  rest.  Can  it  be  supposed  that  a  creditor  holding  the 
note  of  one  thought  to  be  in  good  credit,  and  who  has  ample  means 
of  paying,  shall  have  a  right,  when  he  finds  there  is  an  inability  to 
take  up  the  note  on  its  becoming  due,  to  receive  partial  payment, 
give  further  credit,  and  thus  put  the  debt  in  jeopardy,  and  after  lie 
has  indulged  the  debtor  ad  libitwn,  shall  call  upon  the  guarantee  for 
the  deficiency,  when  absolute  insolvency  has  taken  place  and  all 
other  creditors  have  saved  themselves  out  of  his  effects?  This  would 
offend  all  the  analogies  of  the  law,  which  require  good  faith  and 
diligence,  to  enable  a  creditor  to  call  upon  parties  consequentially 
liable,  and  would  place  a  guarantee  in  a  worse  condition  than  a 
surety;  who,  being  an  original  promisor,  may  take  up  the  note 
when  it  becomes  due  and  sue  the  principal  immediately.  The  glar- 
ing injustice  of  such  a  position  has  been  discountenanced  by  those 
courts  which  have  had  the  question  presented  distinctly  to  them. 

In  8  East,  242,  Lord  Ellenborough  ssljs  the  same  strictness  of  proof 
is  not  necessary  to  charge  the  guarantee,  as  would  have  been  neces- 
sary to  support  an  action  on  the  bill  itself,  that  is,  against  an  indorscr, 
where,  by  the  law  merchant,  a  demand  upon  and  refusal  by  the 
acceptors  must  have  been  proved,  in  order  to  charge  the  other  party 
on  the  bill,  and  this,  notwithstanding  the  bankruptcy  of  the  accept- 
ors. Guarantees  insure  the  solvency  of  the  principals,  and  there- 
fore, if  the  latter  become  bankrupt  and  notoriously  insolvent,  it  is 
the  same  thing  as  if  they  were  dead,  and  it  is  nugatory  to  go 
through  the  ceremony  of  making  a  demand  upon  them.  Lawrence, 
J.,  says,  though  proof  of  demand  of  the  acceptors,  who  had  be- 
come bankrupt,  were  not  necessary  to  charge  the  guarantees,  3^et 
the  latter  are  not  prevented  from  showing  that  they  ought  not  to 
have  been  called  upon  at  all,  for  that  the  principal  debtors  could 
have  paid  the  bill  if  demanded  of  them.  Le  Blanc,  J.,  says,  it 
is  sufficient  as  against  a  guarantee,  that  the  holder  of  the  bill  could 
not  have  obtained  the  money  by  making  a  demand  upon  the  bill. 

And  in  2  Taunt.  206,  it  was  decided  that  a  guarantee  is  entitled 
to  notice,  if  the  parties  to  the  bill  are  not  insolvent  at  the  time  it  is 
due. 

But  the  principle  is  more  accurately  and  intelligibly  stated  by 
Duncan,  J.,  in  the  case  of  Cannon  v.  Gibbs,  9  Serg.  &  E.  202.  "  I 
think,"  says  he,  "  upon  a  review  of  these  cases,  the  line  is  clearly 
marked  out.  It  is  this:  that  the  guarantor  is  discharged,  if  notice 
is  not  given  of  non-payment  to  him,  that  he  may  avail  himself  of 
proper  presentment,  demand,  and  of  due  notice  of  non-payment 


CLARK  V.   SICKLER.  335 

where  the  drawer  and  indorser,  or  either  of  them,  are  solvent  at  the 
time  the  note  became  due.  But  where  both  are  then  insolvent,  this 
would  be  prima  facie  evidence  that  a  demand  on  them,  and  notice 
to  the  guarantor,  would  be  of  no  avail,  and  therefore,  the  giving 
notice  to  a  guarantor,  not  a  party  to  the  bill,  would  be  dispensed  with, 
the  presumption  being,  that  the  guarantor  was  not  prejudiced  by 
the  want  of  notice." 

And  this  seems  to  be  the  true  ground;  for  it  leaves  the  loss  upon 
the  party  whose  gross  negligence  is  the  cause  of  loss  to  any  one,  in- 
stead of  throwing  it  upon  him  who  would  suffer  entirely  from  the 
carelessness  of  the  party  who  would  recover  of  him.  Upon  this  prin- 
ciple we  decide  the  present  case  in  favor  of  the  defendant,  without 
trenching  at  all  upon  the  decisions  relating  to  the  liability  of  sureties, 
or  those  who,  by  signing  their  names  in  blank  upon  notes  not  nego- 
tiable, are  regarded  as  quasi  sureties ;  this  being  clearly  a  contract 
of  guarantee  only,  in  its  form,  and  subject  to  the  rules  which  govern 
that  species  of  contract.  It  is  clear  that  both  the  promisors  in  the 
note  were  solvent  when  it  became  due,  and  that  they  had  abundant 
property  liable  to  attachment.  But  the  plaintiffs,  with  the  knowledge 
of  their  delinquency,  lay  by  nine  months,  during  which  time  their 
property  was  sacrificed  and  all  hopes  of  obtaining  payment  were  by 
that  means  lost.  Some  intimations  were  made  in  the  argument, 
that  it  was  the  usage  of  the  bank,  when  notes  have  been  discounted, 
to  suffer  a  renewal  from  time  to  time,  on  the  payment  of  a  certain 
portion  of  the  sum  loaned,  as  the  notes  should  become  due.  It  is  not 
stated  in  the  case  agreed,  that  there  was  such  a  usage,  or  that  the 
defendant  knew  of  it.  If  at  the  time  he  gave  his  guarantee  there 
was  any  such  usage,  or  any  stipulation  to  that  effect,  and  this  was 
known  to  the  defendant,  it  may  be  questionable  whether  the  want 
of  notice  would  avail  him  in  defence. 

Plaintiffs  nonsuit. 


CLARK   V.    SICKLER. 

Supreme  Court  of  New  York,  February,  1876.     64  N.  Y.  231. 

One  who  is  bound  on  a  contract  of  assurance,  is  discharged  bv  any  act  on  the  part 
of  the  creditor,  in  dealing  with  the  debtor,  which  act  operates  to  the  legal  injury  of  the 
assurer. 

The  case  is  stated  in  the  opinion. 

[Argument  reported.] 

Church,  C.  J.  This  action  is  upon  a  promissory  note  made  by 
one  Mott,  as  the  principal  debtor,  and  by  the  defendar-t's  intestate 


336  assurer's  contract. 

as  his  surety.  The  referee  found  that  Mott,  the  principal  debtor, 
some  time  after  the  note  was  due,  went  to  the  holder  with  the  money 
to  pay  it,  which  the  latter  (by  his  wife  acting  for  him  with  authority), 
declined  to  receive,  giving  as  a  reason  that  he  had  no  use  for  the 
money,  and  requested  that  Mott  would  keep  it.  It  is  also  found  that 
Mott  was  then  solvent,  and  afterward  became  insolvent,  and  the 
question  is,  whether  the  surety  is  discharged.  As  a  matter  of  ab- 
stract equity,  the  argument  is  plausible,  at  least,  that  inasmuch  as 
the  note  was  not  paid  by  reason  of  the  request  of  the  holder,  the  latter 
ought  not  to  enforce  it  against  the  surety  after  the  principal  debtor 
had  become  insolvent.  The  general  rule  applicable  to  the  relation 
of  creditor  and  surety  is  stated  by  Judge  Story  as  follows :  "  If  a 
creditor  does  any  act  injurious  to  the  surety,  or  inconsistent  with 
his  rights,  or  if  he  omits  to  do  any  act,  when  required  by  the  surety, 
which  his  duty  enjoins  him  to  do,  and  the  omission  proves  injuri- 
ous to  the  surety,  the  latter  will  be  discharged,  and  he  may  set 
up  such  conduct  as  a  defence  to  any  suit  brought  against  him." 
1  Story's  Equity,  §§  325,  326,  and  cases  cited  in  note.  The  current 
of  authority,  which  I  think  is  quite  harmonious,  establishes  that  the 
act  which  will  discharge  a  surety  must  be  legally  injurious  or  in- 
consistent with  his  legal  rights.  An  agreement  with  the  principal 
debtor  extending  the  time  of  payment,  or  in  any  manner  changing 
the  contract  made  by  the  surety,  will  have  that  effect.  So  the  release 
of  a  security  held  by  the  creditor  and  the  like.  The  facts  found  by 
the  referee  do  not  present  a  case  within  the  rule.  The  contract  was 
not  changed.  The  time  was  not  extended  by  any  binding  agreement. 
An  action  might  have  been  brought  immediately  after  the  trans- 
action in  respect  to  the  payment,  and  the  circumstances  which  took 
place  would  not  have  constituted  a  defence.  It  is  well  settled  that 
mere  indulgence  will  not  discharge  a  surety.  Thompson  v.  Hall, 
45  Barb.  214 ;  Schroeppel  v.  Shaw,  3  N.  Y.  446 ;  Fulton  v.  Matthews, 
15  Johns.  433.  The  holder  preferred  not  to  collect  the  note  and  gave 
indulgence,  but  not  a  stipulated  extension.  The  other  principle 
referred  to  is,  that  the  surety  may  be  discharged  from  an  omission 
of  duty  on  the  part  of  the  creditor,  but  the  surety  must  intervene 
and  request  the  performance  of  the  duty.  It  has  been  established, 
accordingly,  that  if  a  surety  request  the  creditor  to  sue,  and  the  latter 
neglects  to  do  so,  the  surety  will  be  discharged  if  the  neglect  has 
produced  injury,  Eemsen  v.  Beekman,  25  N".  Y.  552,  Here  there 
was  no  request.  The  surety  did  nothing.  He  was  not  prevented  from 
demanding  prosecution  by  the  creditor,  nor  from  paying  the  note 
and  prosecuting  the  principal  himself. 

We  are  now  asked  to  go  a  step  further  and  hold  that  if  a  note 
is  not  paid  because  the  creditor  prefers  to  give  indulgence  rather 
than  receive  pa}Tnent,  the  surety  is  discharged  if  the  principal 
debtor  happens  to  become  insolvent,    "We  have  not  been  referred  to 


CLAKK  V.   SICKLER.  337 

any  authority  for  such  a  precedent.  The  case  of  Lewis  ^  v.  Van 
Dusen,  25  Mich.  351,  was  upon  a  guaranty  of  collection.  It  does 
not  appear  distinctly  upon  what  ground  the  court  placed  its  decision; 
but  the  question  of  diligence  was  necessarily  involved,  besides  the 
refusal  to  accept  the  money  when  offered,  and  there  was  a  neglect 
to  prosecute  for  two  years,  during  which  the  guarantor  became  in- 
solvent. The  decision  was  clearly  right  without  the  fact  of  the  offer 
to  pay,  and  that  circumstance  only  aggravated  the  laches.  In  the 
case  cited  from  46  Vt.  258,  Joslyn  v.  Eastman,  there  was  a  tender 
of  the  money  due,  which  was  held  to  discharge  the  surety,  although 
not  accepted.  On  the  other  side,  the  recent  case  in  this  court  of 
The  Second  National  Bank  of  Oswego  v.  Poucher,  56  N.  Y.  348, 
decided  that  where  a  debtor  owing  two  demands  offered  to  pay  one 
of  them,  and  was  induced  by  the  creditor  to  pay  the  other,  the  in- 
dorsers  upon  the  demand  not  paid  were  not  discharged.  The  cir- 
cumstances which  will  discharge  a  surety  are  well  defined  by  repeated 
adjudications,  viz.,  the  doing  an  act  which  is  legally  injurious  to 
the  surety,  or  which  impairs  his  legal  rights,  or  the  omission  to 
perform  a  duty  when  required  by  a  surety,  which  omission  results  in 
injury  to  the  surety.  Indulgence  to  a  debtor  is  not  sufficient,  and 
the  distinction  is  not  apparent  between  indulgence,  with  the  ex- 
press consent  or  even  request  of  the  creditor,  and  mere  silent  delay, 
provided  the  contract  is  not  changed  or  impaired.  It  is  a  common 
occurrence  for  debtors  to  ask  indulgence  without  any  specified  time, 
and  creditors  would  constantly  be  in  danger  of  losing  their  debts 
by  mere  negative  acquiescence.  The  facts  presented  in  this  case 
rarely  occur.  It  is  not  often  that  the  debtor  omits  to  pay  at  the 
request  of  the  creditor,  but  if  we  enlarge  the  grounds  for  discharging 
a  surety  in  such  a  case,  we  shall  establish  a  precedent  which  may 
prove  highly  injurious  in  unsettling  and  weakening  the  obligations 
of  written  instruments.  It  is  better  to  adhere  to  established  general 
rules  than  to  attempt  to  work  out  equity  in  exceptional  cases. 

It  is  quite  evident  that  the  creditor  had  no  idea  of  discharging 
the  surety.  He  did  not  prevent  the  payment  of  the  note.  He  did 
not  refuse  to  receive  the  money.  He  only  expressed  a  desire  that 
it  should  not  be  paid.  There  was  no  tender  or  attempt  to  tender  the 
money.  The  contract  was  not  changed.  The  surety  did  not  inter- 
vene and  request  any  action  on  the  part  of  the  creditor;  and  al- 
though loss  has  occurred  in  consequence  of  the  indulgence,  it  cannot 
be  affirmed  that  the  creditor  did  any  act  impairing  the  legal  rights 
of  the  surety,  nor  did  the  latter  take  any  action  to  relieve  himself 
from  liability. 

The  judgment  must  be  affirmed. 

All  concur. 

Judgment  affirmed. 

*  Seara  v.  Van  Dnsen,  25  Mich.  351,  is  probably  intended. 
22 


333  assurer's  contract. 

NEWCOMB   V.   EAYNOR. 

Supreme  Court  of  New  York,  May,  1839.     21  Wend.  108. 

An  indorser  is  so  far  a  suretj  for  prior  parties  that'  a  discharge  of  them  dis- 
charges him :  i  e.  g.  if  the  holder  of  a  promissory  uote  release  the  first  indorser,  this 
discharges  the  subsequent  indorsers. 

Assumpsit  against  the  maker  and  second  and  third  indorsers  of 
a  promissory  note.  Plea  by  the  indorsers  that  the  holder  had  given 
a  release  under  seal  to  Goings,  the  first  indorser.  Demurrer  to 
the  plea. 

[Argument  not  reported.] 

Nelson,  C.  J.  I  am  of  opinion  the  plea  constitutes  a  good  bar 
to  the  action.  As  between  the  first  and  subsequent  indorsers,  the 
former  must  be  regarded  in  the  light  of  principal ;  he  stands  behind 
them  upon  the  paper,  and  is  bound  to  take  it  up,  in  case  of  default 
of  the  maker.  A  discharge  of  him,  therefore,  by  the  holder  (regard- 
ing the  relative  position  of  the  parties),  on  general  principles, 
operates   to  release  them. 

^,^Jt  is  said  their  rights  are  not  prejudiced,  as  they  may  still  resort 
to  an  action  against  him  if  subjected  to  the  payment  of  the  note, 
as  the  release  leaves  the  implied  contract  existing  between  the  first 
and  subsequent  indorsers  unimpaired.  Conceding  this  to  be  so, 
to  permit  a  recovery  against  the  defendants  would  but  lead  to  an 
unnecessary  circuity  of  action.  The  plea  shows  a  discharge  for  a 
presumed  good  consideration  (as  it  is  under  seal)  of  the  first  in- 
dorser, and  it  cannot  be  doubted,  as  the  case  stands,  that  if  the 
defendants  should  be  obliged  to  call  upon  him,  the  plaintiff  would  be 
bound  to  take  his  place.  The  case,  therefore,  comes  within  the 
familiar  rule  that  a  release  of  the  principal  operates  to  discharge 
the  surety. 

It  is  further  said  that  Goings  may  not  have  been  legally  charged 
as  an  indorser.  If  this  were  so,  the  plaintiff  should  have  replied 
the  fact,  as  we  will  not  presume  it  in  the  face  of  the  acts  of  both 
him  and  the  plaintiff  to  the  contrary.  The  release  would  not  have 
been  necessary  on  such  a  supposition. 

Judgment  for  defendants  on  demurrer;  leave  to  amend  on  usual 
terms. 

1  N.  I.  L.  §  137. 


McLEMORE   V.   POWELL.  339 

McLEMOEE    v.    POWELL. 

Supreme  Court  of  the  Uuited  States,  January,  1827.     12  Wheat.  554. 

But  a  mere  agreement  to  give  time  to  the  debtor,  which  agreement  is  not  founded 
on  consideration,  will  not  discliarge  the  surety  ;  ^  e.  g.  agreement  by  the  holder  with 
the  drawer  of  a  bill  of  exchange  for  delay,  made  without  consideration,  and  not  com- 
municated to  the  indorser,  does  not  discharge  the  indorser. 

The  case  is  stated  in  the  opinion  of  the  court. 
[Argument  not  reported.] 

Story,  J.  This  is  a  writ  of  error  to  the  Circuit  Court  of  the 
United  States  for  the  District  of  West  Tennessee. 

The  original  action  was  assumpsit,  brought  by  Powell,  Fosters, 
&  Co.,  as  holders  of  a  bill  of  exchange,  drawn  by  one  Thomas 
Fletcher,  in  May,  1819,  at  Nashville,  upon  Messrs.  McNeil,  Fisk, 
&  Eutherford,  at  New  Orleans,  payable  to  Thomas  Read,  or  order, 
for  $2000  in  sixty  days  after  date,  and  by  him  indorsed  to  the  defend- 
ant, John  C.  McLemore,  and  by  him  to  the  plaintiffs.  The  bill, 
upon  presentment  for  acceptance,  was  dishonored,  and  due  notice 
of  the  dishonor  was  given  to  the  defendant. 

At  the  trial,  upon  the  general  issue,  Thomas  Fletcher,  the  drawer, 
was,  under  a  release  from  the  defendant,  McLemore,  examined  as 
a  witness,  and,  among  other  things,  testified  that,  in  the  month  of 
October  following  the  dishonor  of  the  bill,  "  one  of  the  plaintiffs 
applied  to  him  at  Nashville  for  the  money  on  the  bill,  and  threatened 
to  sue  immediately  if  an  arrangement  was  not  made  to  pay  the  bill. 
The  witness  then  proposed  to  the  plaintiff,  if  he  would  indulge  him 
four  or  five  weeks,  he  would  himself,  to  a  certainty,  pay  the  bill. 
To  this  the  plaintiff  agreed,  and  told  the  witness  he  was  going  to 
Louisville,  Kentucky,  and  would  return  by  Nashville,  about  the 
expiration  of  that  time,  and  would  receive  said  payment.  Since 
said  time  the  witness  has  never  seen  said  plaintiff."  The  witness 
further  testified  that  the  defendant  was  an  accommodation  indorser 
for  him  on  the  bill;  that  the  plaintiff  told  him  that  the  bill  would 
be  left  with  a  Mr.  Washington,  at  Nashville;  that  he  expected  he 
would  himself  be  at  that  place  at  the  time  agreed  on,  but  that,  if 
he  did  not  come,  he  would  give  the  instructions  to  Mr.  Washington, 
by  letter,  what  to  do  if  the  witness  did  not  pay  at  the  expiration  of 
the  time  agreed  on.  It  did  not  appear  that  any  consideration  was 
paid  or  stipulated  for  this  delay;  and  no  suit  was  commenced  until 
after  this  period  had  elapsed.  The  district  judge  instructed  the  jury 
that,  if  they  believed  the  conversation  above  stated  amounted  to  no 
more  than  an  agreement  that  a  suit  should  not  be  brought  for  four 

1  N.  L  L.  §  137,  6. 


340  assurer's  contract. 

or  five  weeks,  and  that  no  premium  or  consideration  was  given  or 
paid,  or  to  be  paid  by  Fletcher,  the  indorsers  were  not  discharged; 
that  an  agreement  for  giving  day  must  be  an  obligatory  contract 
for  a  consideration  which  ties  up  the  hands  of  the  creditor  and  dis- 
ables him  from  suing,  thereby  affecting  the  interests  and  rights  of 
the  indorser;  that  the  indorser  has  a  right  to  require  and  demand 
of  the  creditor  to  bring  a  suit  against  the  drawer,  and  if  he  has  dis- 
abled himself  from  bringing  a  suit  by  a  contract  for  a  consideration, 
he  has  thereby  released  the  indorser;  and  that  if  the  jury  were 
satisfied  from  the  testimony  that  time  was  given  for  a  valuable  con- 
sideration paid  or  to  be  paid,  or  that  a  new  security  was  taken  by 
the  holder,  the  indorser  was  discharged  and  absolved  from  all  the 
obligations  of  the  indorsement. 

Under  this  instruction,  the  jury  found  a  verdict  for  the  plaintiffs, 
upon  which  there  was  judgment  given  in  their  favor.  A  bill  of 
exceptions  was  taken  to  the  charge  of  the  court;  and  the  present 
writ  of  error  is  brought  for  the  purpose  of  ascertaining  its  legal 
correctness. 

It  is  unnecessary  to  give  any  opinion  upon  that  part  of  the  charge 
which  respects  the  right  of  an  indorser  to  require  the  holder  to 
commence  a  suit  against  the  drawer.  In  general,  the  indorser, 
by  paying  the  bill,  has  a  complete  power  to  reinstate  himself  in  the 
possession  and  ownership  of  the  bill,  and  thus  to  entitle  himself 
to  a  personal  remedy  on  the  instrument  against  all  antecedent  parties. 
The  same  reason,  therefore,  does  not  exist,  as  may  in  common  cases 
of  suretyship,  to  compel  the  creditor  to  active  diligence  by  suit 
against  the  principal.  Without  expressing  any  opinion  on  this 
point,  it  is  sufficient  to  say  that  the  error,  if  any,  was  favorable  to 
the  defendant,  and,  therefore,  it  can  form  no  subject  of  complaint 
on  his  part. 

The  case  then  resolves  itself  into  this  question,  —  whether  a  mere 
agreement  with  the  drawers  for  delay,  without  any  consideration  for 
it,  and  without  any  communication  with  or  assent  of  the  indorser, 
is  a  discharge  of  the  latter,  after  he  has  been  fixed  in  his  respon- 
sibility by  the  refusal  of  the  drawee,  and  due  notice  to  himself. 
And  we  are  all  of  opinion  that  it  is  not.  We  admit  the  doctrine  that, 
although  the  indorser  has  received  due  notice  of  the  dishonor  of  the 
bill,  yet  if  the  holder  afterwards  enters  into  any  new  agreement  with 
the  drawer  for  delay,  in  any  manner  changing  the  nature  of  the 
original  contract,  or  affecting  the  rights  of  the  indorser,  or  to  the 
prejudice  of  the  latter,  it  will  discharge  him.  But,  in  order  to  pro- 
duce such  a  result,  the  agreement  must  be  one  binding  in  law  upon 
the  parties,  and  have  a  sufficient  consideration  to  support  it.  An 
agreement  without  consideration  is  utterly  void,  and  does  not  sus- 
pend for  a  moment  the  rights  of  any  of  the  parties.  In  the  present 
case,  the  jury  have  found  that  there  was  no  consideration  for  the 


McLEMORE   V.   POWELL.  341 

promise  to  delay  a  suit,  and,  consequently,  the  plaintiffs  were  at 
liberty  immediately  to  have  enforced  their  remedies  against  all  the 
parties.  It  was  correctly  said  by  Lord  Eldon,  in  English  v.  Darley, 
2  Bos.  &  Pul.  61,  that  "  as  long  as  the  holder  is  passive,  all  his 
remedies  remain ; "  and,  we  add,  that  he  is  not  bound  to  active  dili- 
gence. But,  if  the  holder  enters  into  a  valid  contract  for  delay,  he 
thereby  suspends  his  own  remedy  on  the  bill  for  the  stipulated 
period;  and,  if  the  indorser  were  to  pay  the  bill,  he  could  only  be 
subrogated  to  the  rights  of  the  holder,  and  the  drawer  could  or 
might  have  the  same  equities  against  him  as  against  the  holder  him- 
self. If,  therefore,  such  a  contract  be  entered  into  without  his 
assent,  it  is  to  his  prejudice,  and  discharges  him. 

The  cases  proceed  upon  the  distinction  here  pointed  out,  and 
conclusively  settle  the  present  action.  In  Walw3Ti  v.  St.  Quentin,  1 
Bos.  &  Pul.  652,  where  the  action  was  by  indorsees  against  the  drav/er 
of  a  bill,  it  appeared  that,  after  the  bill  had  become  due,  and  been 
protested  for  non-payment,  though  no  notice  had  been  given  to  the 
drawer,  he  having  no  effects  in  the  hands  of  the  acceptor,  the  plain- 
tiffs received  part  of  the  money  on  account  from  the  indorser;  and 
to  an  application  from  the  acceptor,  stating  that  it  was  probable 
he  should  be  able  to  pay  at  a  future  period,  they  returned  for  answer 
that  they  would  not  press  him.  The  court  held  it  no  discharge; 
and  Lord  Chief  Justice  Eyre,  in  delivering  the  opinion  of  the  court, 
said  that  if  this  forbearance  to  sue  the  acceptor  had  taken  place 
before  noticing  and  protesting  for  non-payment,  so  that  the  bill 
had  not  been  demanded  when  due,  it  was  clear  the  drawer  would  have 
been  discharged,  for  it  would  be  giving  a  new  credit  to  the  acceptor. 
But  that,  after  protest  for  non-payment,  and  notice  to  the  drawer, 
or  an  equivalent  to  notice,  a  right  to  sue  the  drawer  had  attached, 
and  the  holder  was  not  bound  to  sue  the  acceptor.  He  might  for- 
bear to  sue  him.  The  same  doctrine  was  held  in  Arundel  Bank  v. 
Goble,  reported  in  a  note  to  Chitty  on  Bills.  Chitty,  379,  note  c, 
ed.  1821.  There  the  acceptor  applied  for  time,  and  the  holders  as- 
sented to  it,  but  said  they  should  expect  interest.  It  was  contended 
that  this  was  a  discharge  of  the  drawer ;  but  the  court  held  otherwise, 
because  the  agreement  of  the  plaintiffs  to  wait  was  without  consid- 
eration, and  the  acceptor  might,  notwithstanding  the  agreement, 
have  been  sued  the  next  instant;  and  that  the  understanding  that 
interest  should  be  paid  by  the  acceptor  made  no  difference.  So,  in 
Badnall  v.  Samuel,  3  Price's  Exch.  521,  in  a  suit  by  the  holder 
against  a  prior  indorser  of  a  bill  of  exchange,  it  was  held  that  a  treaty 
for  delay  between  the  holder  and  acceptor,  upon  terms  which  were  not 
finally  accepted,  did  not  discharge  the  defendant,  although  an  actual 
delay  had  taken  place  during  the  negotiation,  because  there  was 
no  binding  contract  which  precluded  the  plaintiffs  from  suing  the 
acceptor  at  any  time. 


342  ASSUREU'S  CONTRACT. 

Upon  authority,  therefore,  we  are  of  opinion,  that  this  writ  of 
error  cannot  be  sustained,  and  that  the  judgment  below  was  right. 
Upon  principle,  we  should  entertain  the  same  opinion,  as  we  think 
the  whole  reasoning  upon  which  the  delay  of  the  holder  to  enforce 
his  rights  against  the  drawer  is  held  to  discharge  the  indorser  after 
notice,  is  founded  upon  the  notion  that  the  stipulation  for  delay 
suspends  the  present  rights  and  remedies  of  the  holder. 

The  judgment  of  the  court  below  is,  therefore. 

Affirmed  with  costs. 


SOHIER   V.   LOEING. 

Supreme  Court  of  Massachusetts,  November,  1850.     6  Cush,  537. 

Nor  does  a  binding  agreement  to  give  time  to  the  primary  debtor  discharge  the 
enrety,  if  the  creditor  has  expressly  reserved  his  rights  against  the  surety  ;  ^  e.  g.  a 
composition  deed,  whereby  the  holder  of  a  bill  of  exchange  gives  time  to  the  acceptor 
and  agrees  to  discharge  him  on  receiving  a  portion  of  the  debt,  reserving  the  holder's 
remedies  against  other  parties  to  the  bill,  does  not  discharge  the  drawer  and  indorsers. 

This  was  an  appeal  from  a  decision  of  Ellis  Gray  Loring,  Esquire, 
a  master  in  chancery,  overruling  the  motion  of  the  appellant,  as 
assignee  of  Edward  H.  Green  &  Company,  insolvent  debtors,  to  ex- 
punge or  reduce  the  amount  of  certain  claims,  proved  before  the 
master  against  the  estate  of  Green  &  Company. 

The  case  was  submitted  to  the  court  upon  the  following  agreed 
statement  of  facts:  On  the  23d  of  February,  1846,  a  warrant  was 
issued  by  the  said  master,  against  the  estate  of  Edward  H.  Green 
and  John  E.  Short,  both  of  Boston,  merchants  and  partners,  doing 
business  under  the  firm  of  Edward  H.  Green  &  Company.  The  first 
publication  of  the  notice  required  by  the  warrant  was  made  on  the 
24th  of  February,  1846,  and,  on  the  11th  of  March  following,  the 
appellant  was  chosen  assignee,  and  duly  received  an  assignment  of 
all  the  insolvent's  estate. 

Previous  to  their  insolvency.  Green  &  Company,  as  copartners, 
were  employed  by  Oliver  P.  Mills,  of  New  York,  to  make  and  ne- 
gotiate certain  bills  of  exchange,  drawn  on  the  firm  of  Major  & 
Wallace,  of  London;  and  from  time  to  time,  as  opportunity  offered, 
Green  &  Company  had  drawn  on  account  of  Mills  various  bills  of 
exchange,  against  consignments  of  goods  in  the  hands  of  Major  & 
Wallace  belonging  to  Mills,  which  bills  were  sold  in  the  usual  course 
of  business  to  the  appellees.  Green  &  Company,  for  a  commission 
paid  to  them  by  Mills,  had  become  responsible  as  the  drawers  or 
indorsers  of  these  bills,  which  were  duly  accepted  by  Major  &  Wallace, 
but  were  not  paid  at  maturity.    Notice  of  their  dishonor  was  duly 

»  N.  I.  L.  §  137,  5  and  6. 


SOHIER   V.   LORING.  343 

sent  to  the  drawers,  and  the  bills  were  taken  up  by  the  appellees, 
and  proved  by  them  against  the  estate  of  Green  &  Company. 

The  appellees,  whose  claims  were  thus  proved,  Hawes,  Gray,  & 
Company,  proved  on  the  10th  of  March,  1846;  Benjamin  Loring 
and  Levi  H.  Marsh,  executors  of  Elijah  Loring,  proved  on  the  20th 
of  March}  Thomas  Tarbell  &  Company  proved  on  the  29th  of  April, 
1846 ;  and  Samuel  May  &  Company  proved  on  the  18th  of  January, 
1847 ;  the  whole  amounting  to  about  $26,000. 

The  bills  proved  by  Hawes,  Gray,  &  Company  were  drawn  by 
Mills  payable  to  his  own  order,  and  indorsed  by  him  to  the  order  of 
Green  &  Company,  and  by  them  indorsed.  The  bills  proved  by  the 
other  appellees  were  drawn  by  Green  &  Company  on  account  of  Mills. 
All  the  bills  were  directed  to  Major  &  Wallace,  and  were  by  them 
accepted.  The  several  appellees  sent  their  bills  to  England  in  pay- 
ment of  debts  or  to  make  purchases  there  during  the  months  of 
November  and  December,  1845;  and  the  bills  were  at  maturity 
returned  to  them  dishonored,  by  due  course  of  mail. 

At  a  meeting  of  the  parties  holding  bills  drawn  by  or  by  the 
order  of  Oliver  P.  Mills  held  in  London,  on  the  5th  of  June,  1846, 
a  proposition  for  compromising  their  claims  against  Major  &  Wallace 
on  these  bills  was  agreed  to;  and,  on  the  23d  of  December  following, 
an  indenture  for  that  purpose  was  drawn  up  and  executed  in  London, 
by  Major  &  Wallace,  by  these  bill-holders,  including  the  appellees, 
by  their  respective  agents,  and  by  certain  trustees  appointed  under 
the  composition  deed.  This  composition  deed  recited  that  Major 
&  Wallace,  being  unable  to  pay  in  full  all  their  debts,  had  proposed 
to  pay  their  creditors,  including  the  parties  holding  bills  drawn  by 
or  by  the  order  of  Oliver  P.  Mills  and  accepted  by  Major  &  Wallace, 
a  composition  of  five  shillings  in  the  pound,  on  the  amount  of  their 
debts,  by  three  equal  instalments,  payable  at  three,  six,  and  nine 
months  from  the  date  of  the  deed,  and  to  be  secured  by  promissory 
notes  of  James  Wallace,  payable  at  those  periods  respectively,  in 
full  satisfaction  and  discharge  of  such  debts ;  and  that  their  creditors, 
including  said  bill-holders,  had  consented  to  and  agreed  to  accept 
such  composition;  and  that  the  bill-holders,  had  received  in  addi- 
tion to  this  composition  four  shillings  in  the  pound  in  money. 
Major  &  Wallace  by  this  deed  assigned  certain  goods  to  certain 
trustees  therein  named,  in  trust  to  sell  and  convert  the  same  into 
money,  and  divide  the  proceeds  among  the  bill-holders,  parties  to 
the  composition  deed;  and  the  bill-holders  covenanted  not  to  sue 
Major  &  Wallace  on  said  bills  of  exchange,  unless  on  default  of 
payment  of  the  notes  of  James  Wallace;  and  that  upon  payment 
of  those  notes  to  the  trustees,  the  bill-holders  would  release  Major 
&  Wallace  from  the  said  bills  of  exchange.  Then  followed  this 
clause :  "  Provided  always,  and  it  is  hereby  expressly  agreed  and 
declared,  that  it  shall  be  lawful  for  the  said  bill-holders,  parties 


344  assueee's  contract. 

hereto  of  the  second  part,  to  execute  these  presents  without  prejudice 
to  their  rights  and  remedies  upon  the  said  bills,  mentioned  in  the 
second  schedule  hereunder  written,  respectively,  or  upon  collateral 
or  other  securities  for  the  same,  respectively,  against  any  person  or 
persons  whomsoever  other  than  the  said  McKedy  Major  and  James 
Wallace,  or  either  of  them,  their  or  either  of  their  heirs,  executors, 
and  administrators;  and  that  notwithstanding  these  presents,  or 
anything  herein  contained,  they,  the  said  bill-holders  respectively, 
and  their  respective  executors,  administrators,  and  assigns,  shall 
be  at  liberty  to  enforce  and  adopt  all  or  any  of  such  rights  or 
remedies,  against  any  such  other  person  or  persons,  in  the  same 
manner  as  if  these  presents  had  not  been  executed."  And  the  bill- 
holders  covenanted  to  indemnify  the  trustees,  from  all  claims  for 
or  on  account  of  the  goods  assigned  to  them  in  trust,  or  the  payment 
of  any  dividend  out  of  the  proceeds  thereof. 

The  dividends,  which  were  made  under  this  indenture,  amounting 
to  four  shillings  in  the  pound,  have  been  received  by  the  appellees 
respectively. 

On  the  4th  of  August,  1847,  the  appellant,  as  the  assignee  of 
Green  &  Company,  filed  with  the  master  in  chancery  a  written  mo- 
tion, that  the  claims  of  the  several  appellees  should  be  expunged  from 
the  list  of  debts  proved  against  Green  &  Company;  or,  if  not  ex- 
punged, that  they  should  be  reduced  in  amount,  by  deducting  there- 
from the  payments  received  by  the  appellees,  respectively,  under  the 
provisions  of  the  composition  deed;  but  the  master,  after  due  hear- 
ing, overruled  the  motion,  and  the  assignee  appealed  to  this  court. 

It  was  agreed,  that  if  the  court  should  sustain  the  master's  deci- 
sion, judgment  should  be  entered  for  the  appellees ;  but  if  the  court 
should  reverse  the  decision  of  the  master,  the  case  might  be  sent  to 
a  jury,  to  be  tried  on  such  issue  or  issues  as  the  court  should  direct,  or 
otherwise  disposed  of  as  they  should  determine. 

The  case  was  argued  in  writing. 

[Argument  reported.] 

Metcalf,  J.  The  composition  made  with  the  acceptors  would 
have  discharged  the  drawers  and  indorsers,  if  there  had  not  been 
inserted  in  the  composition  deed  a  proviso  that  it  should  not  preju- 
dice the  holders'  remedies  against  any  other  parties  besides  the 
acceptors.  Bayley  on  Bills  (2d  Araer.  ed.),  357,  358.  The  first  ques- 
tion in  the  case  therefore  is,  what  is  the  legal  effect  of  that  proviso? 

It  is  settled  in  England  that  a  discharge  or  giving  time  by  a 
creditor  to  his  principal  debtor,  will  not  discharge  the  surety,  if  there 
be  an  agreement  between  the  creditor  and  the  principal  debtor  that 
the  surety  shall  not  be  discharged.  And  this  rule  of  law  is  applicable 
to  parties  to  bills  of  exchange  and  promissory  notes,  who  are  liable 


SOHIER   V.   LORING.  345 

only  on  the  failure  of  prior  parties,  though  they  are  not  technically 
sureties  of  those  parties.  1  Steph.  N.  P.  936 ;  Montagu  on  Compo- 
sition, 36;  Burge  on  Suretyship,  210;  Chit,  on  Bills  (10th  Amer. 
ed.),  420;  Byles  on  Bills  (2d  Amer.  ed.),  202.  See  also  Mallet  v. 
Thompson,  5  Esp.  E.  178.  The  same  doctrine  was  advanced  by 
]\ressrs.  Hamilton  and  Eiker,  in  argument,  and  was  recognized  by  the 
Supreme  Court  of  New  York,  in  Stewart  v.  Eden,  2  Caines,  121,  very 
soon  after  it  had  been  laid  down  by  Lord  Eldon,  in  Ex  parte  Gifford, 
6  Ves.  805.  In  this  last  case.  Lord  Eldon  said  sureties  would  not  be 
discharged  by  a  discharge  of  the  principal,  if  there  was  "  a  reserve  of 
the  remedy  "  against  the  surety,  and  that  Lord  Thurlow  had  so  ad- 
mitted in  a  previous  case  not  reported.  He  afterwards  laid  down  this 
principle  more  authoritatively  in  Boultbee  v.  Stubbs,  18  Ves.  20,  and 
Ex  parte  Carstairs,  1  Buck,  560.  In  Ex  parte  Glendinning,  1  Buck, 
517,  he  said:  "  If  a  man  by  deed  agree  to  give  his  principal  debtor 
time,  and  in  the  deed  expressly  stipulate  for  the  reservation  of  all  his 
remedies  against  other  persons,  they  shall  still  remain  liable,  notwith- 
standing the  arrangement  between  their  principal  and  the  creditor." 

In  Nichols  v.  Norris,  3  Bam.  &  Adolph,  41,  the  Court  of  King's 
Bench  decided  that  a  composition  like  that  in  the  present  case,  made 
with  the  indorser  of  a  note  given  for  his  accommodation,  did  not  dis- 
charge the  maker.  It  was  said  by  the  court,  that  such  composition 
deeds  M-ere  very  common,  and  that  the  special  proviso  took  the  case 
out  of  the  common  rule  as  to  the  discharge  of  sureties  by  giving  time 
to  the  principal. 

In  1846,  the  case  of  Kearsley  v.  Cole,  16  Mees.  &  Welsh.  128,  came 
before  the  Court  of  Exchequer.  That  was  an  action  for  money  paid 
for  the  defendant,  for  whom  the  plaintiff  had  been  surety.  The 
defence  was,  that  the  defendant  had  made  an  assignment  to  his 
creditors,  who  had  covenanted  not  to  sue  him.  But  it  appeared  that 
there  was  a  proviso,  in  the  deed  of  assignment,  that  any  creditor 
might  execute  it  without  prejudice  to  any  specific  lien  or  security,  or 
to  any  claim  against  any  surety,  and  that  this  proviso  was  inserted 
with  the  knowledge  and  consent  of  the  plaintiff.  He  was  afterwards 
called  on  as  surety  of  the  defendant,  and  paid  the  claim.  The  ques- 
tion was,  whether  this  pa3Tnent  was  to  the  use  of  the  defendant,  or 
was  a  voluntary  payment,  which  gave  him  no  right  to  reimbursement. 
The  court  held  that  the  plaintiff  was  entitled  to  recover;  he  not 
having  been  discharged  from  his  suretyship  by  the  deed  of  assign- 
ment. The  opinion  of  the  court  was  given  by  Mr.  Baron  Parke,  who 
fully  and  clearly  stated  the  decisions,  and  the  principles  upon  which 
they  were  made,  as  follows :  "  The  question  is,  what  is  the  effect  of 
a  discharge  with  reserve  of  remedies  consented  to  by  the  surety? 
We  do  not  mean  to  intimate  any  doubt  as  to  the  effect  of  a  reserve  of 
remedies  without  such  consent;  and  the  cases  are  numerous  that  it 
prevents  the  discharge  of  a  surety,  which  would  otherwise  be  the 


346  assurer's  contract. 

result  of  a  composition  with,  or  giving  time  to,  a  debtor,  by  a  binding 
instrument;  and  the  reserve  of  remedies  has  that  effect  upon  this 
principle,  —  first,  that  it  rebuts  the  implication  that  the  surety  was 
meant  to  be  discharged,  which  is  one  of  the  reasons  why  the  surety 
is  ordinarily  exonerated  by  such  a  transaction;  and,  secondly,  that 
it  prevents  the  rights  of  the  surety  against  the  debtor  being  impaired, 
the  injury  to  such  rights  being  the  other  reason ;  for  the  debtor  can- 
not complain  if,  the  instant  afterwards,  the  surety  enforces  those 
rights  against  him;  and  his  consent  that  the  creditor  shall  have 
recourse  against  the  surety  is,  impliedly,  a  consent  that  the  surety 
shall  have  recourse  against  him.  This  is  the  effect  of  what  Lord 
Eldon  says  in  Ex  parte  Gifford,  and  Boultbee  v.  Stubbs,  as  to  the 
reserve  of  remedies;  and  the  general  proposition,  that,  with  that 
recourse,  the  composition  or  giving  time  does  not  discharge  the 
surety,  is  supported  by  those  and  the  following  cases:  Ex  parte 
Glendinning ;  Nichols  v.  Norris ;  Smith  v.  Winter,  4  Mees.  &  Welsh. 
454,  and  others.  This  point  must,  therefore,  be  considered  as  settled. 
Some  remarks  have,  indeed,  been  made  by  Lord  Denman,  in  the 
case  of  Nicholson  v.  Revill,  4  Adolph.  &  Ellis,  675,  on  the  doctrine 
of  Lord  Eldon  in  Ex  parte  Gifford,  throwing  doubt  on  its  correctness, 
on  the  supposition  that  Lord  Eldon  had  held  that  a  creditor  could 
release  one  joint  and  several  debtor,  and  hold  another  liable  by  a 
reserve  of  remedies;  which  would  certainly  be  against  the  decision 
in  Cheetham  v.  Ward,  1  Bos.  &  Pul.  630,  unless  the  instrument  of 
release  could,  by  reason  of  the  context,  be  construed  to  be  cove- 
nant not  to  sue,  as  it  was  in  the  case  of  Solly  v.  Forbes,  2  Brod.  & 
Bing.  38.  But  we  consider  it  clear  that  Lord  Eldon  meant  only  to 
apply  the  doctrine  to  cases  where  there  was  no  release,  but  a  compo- 
sition, or  giving  time,  not  amounting  to  a  release,  which  is  the  present 
case;  and,  with  reference  to  it,  the  rule  laid  down  by  Lord  Eldon  is 
not  impeached  by  Lord  Denman's  remarks."  And  the  decision  of 
the  court  was,  that  the  surety^s  consent  to  the  creditors'  reserve  of 
their  remedy  against  him  did  not  alter  the  law  of  the  case  in  favor 
of  the  principal. 

These  doctrines  were  incidentally  recognized  by  Mr.  Justice  Wilde 
in  American  Bank  v.  Baker,  4  Met.  175,  and  were  adopted  and 
applied  by  the  Court  of  Appeals  of  Maryland,  in  Clagett  v.  Salmon, 
5  Gill  &  Johns.  314. 

It  is  very  obvious,  that  a  principal  debtor  may  gain  little  or 
nothing  by  such  a  composition  as  this  with  his  creditor;  inasmuch 
as  he  is  left  liable  to  the  like  proceedings  against  him  by  his  sureties, 
which  his  creditor  might  have  instituted  if  no  composition  had  been 
made.  But  if  he  pleases  to  subject  himself  to  that  liability,  by  vol- 
untarily executing  an  agreement  which  has  that  effect,  there  is  no 
legal  reason  why  he  should  not  be  held  to  that  agreement. 

On  these  grounds,  we  are  of  opinion  that  the  holders  of  the  bills, 


SOHIER   V.   LORING.  347 

in  the  present  case,  were  rightly  permitted  by  the  master  to  prove 
their  claims  thereon  against  the  drawers  and  indorsers;  the  latter 
not  having  been  discharged  by  the  composition  made  by  the  former 
with  the  acceptors. 

The  second  question  respects  the  amount  which  the  holders  were 
entitled  to  prove  against  the  drawers  and  indorsers.  And  we  are  of 
opinion  that  each  was  entitled  to  prove  the  full  sum  due  and  unpaid, 
at  the  time  of  making  proof,  on  the  bill  or  bills  held  by  him.  This 
question  is  not  settled  by  any  provision  in  our  insolvent  laws;  and 
we  therefore  adopt  the  rule  applied  in  bankruptcy.  That  rule  is, 
that  a  holder  may  prove  his  claim,  under  commissions  against  the 
drawer,  acceptor,  and  indorser,  and  receive  a  dividend  from  each 
upon  his  whole  claim,  provided  he  does  not  receive,  in  the  whole, 
more  than  his  full  due.  But  there  is  a  distinction  in  this  case,  when 
a  holder  applies  to  prove  his  debt  against  one  party,  after  having 
received  a  part  of  it  from  another,  and  when  he  applies  to  prove 
before  receiving  any  payment  or  composition  from  another  party, 
or  before  a  dividend  has  been  declared  in  his  favor,  under  a  com- 
mission against  another  party.  Any  sum  actually  received  in  pay- 
ment, from  any  party  to  a  bill,  before  proof  made  against  another, 
must  be  deducted  from  the  amount  to  be  proved  against  any  other 
party.  So,  as  a  general  rule,  must  the  amount  of  a  dividend,  declared 
on  the  estate  of  another  party,  be  deducted.  Cooper  v.  Pepys,  and  Ex 
parte  Wildman,  1  Atk.  107,  109;  see  5  Ves.  (Perkins's' ed.)  449, 
note;  Eden's  Bankr.  Law  (2d  ed.),  155;  1  Mont.  &  Ayrt.  Pract.  in 
Bankruptcy,  202,  203. 

In  the  present  case,  we  regard  the  composition  made  with  the 
acceptors,  on  the  23d  of  December,  1846,  as  payment  of  one  fifth  of 
the  amount  of  the  bills.  The  acceptors  then  conveyed  property  in 
trust  to  pay  one-fifth,  and  the  holders  accepted  that  conveyance.  But 
all  the  holders,  except  May  &  Company,  made  proof  of  their  claims 
against  the  estate  of  Green  &  Short,  drawers  or  indorsers,  before  they 
made  the  composition  with  the  acceptors,  and  were  therefore  entitled, 
according  to  the  rule  just  stated,  to  prove  the  full  amount  then  due 
on  their  bills.  May  &  Company  having  made  proof  after  they  had 
executed  the  composition  deed,  by  which  they,  in  legal  effect,  had 
received  part  payment  from  the  acceptors,  were  entitled  to  prove  only 
the  amount  due  after  deducting  that  payment. 

The  proceedings  of  the  master,  from  which  this  appeal  was  taken, 
are  affirmed  in  all  things,  except  as  to  the  amount  proved  by  May 
&  Company,  which  is  to  be  reduced  by  deducting  the  sum  received  by 
them  under  the  composition  with  the  acceptors. 


/^.3. 


6- 


S^c.     S^n 


348  assurer's  contract. 

FAEMERS'  AND  MECHANICS'  BANK  v.  RATHBONE. 

Supreme  Court  of  Vermont,  December,  1852.     26  Vt.  19. 

So  an  accommodation  party  is  an  assurer,^  not,  however,  in  the  full  common-law 
sense  ;  a  discharge  of  the  accommochited  party  will  not  discharge  the  accommodation 
party.  E.  g  one  who  for  value  has  taken  a  bill  of  exchange  accepted  for  the  accom- 
modation of  tiie  drawer,  without  notice  of  the  fact,  may  afterwards  release  the  drawer 
without  discharging  the  acceptor,  though  he  then  have  notice  of  the  nature  of  the 
acceptance. 

Assumpsit  on  two  bills  of  exchange  for  $600  each,  accepted  by 
the  defendant,  payable  to  order  and  indorsed  before  maturity,  for 
value  and  without  notice,  to  the  plaintiff.  Defence,  that  the  bills 
were  accepted  without  consideration  for  the  accommodation  of  the 
drawer,  Caleb  E.  Barton,  and  that  the  plaintiff  released  and  dis- 
charged the  drawer  after  having  acquired  knowledge  of  the  nature 
of  the  acceptance.  The  release  was  long  after  the  plaintiff's  purchase 
of  the  bills. 

The  said  release  was  as  follows : 

"  In  consideration  of  $500  to  the  Farmers'  and  Mechanics'  Bank, 
paid  by  Caleb  E.  Barton,  of  Charlotte,  the  said  bank  hereby  wholly 
release  and  discharge  the  said  Barton  from  all  liability  or  indebted- 
ness to  said  bank,  which  said  bank  have  or  may  claim  to  have  for,  or 
on  account  of,  any  and  all  notes,  cheques,  drafts,  or  bills  of  exchange 
or  acceptances  to  which  Henry  Rathbone  is  in  any  wise  a  party,  either 
as  maker,  drawer,  indorser,  or  acceptor  or  payee  or  drawee,  and  also 
from  all  liability  on  any  paper  which  has  been  sued  against  said 
Barton  in  favor  of  said  bank,  or  any  other  paper  said  bank  may  have 
against  Barton,  previous  to  the  17th  of  March  instant,  which  said 
Rathbone  was  or  is  any  wise  a  party  to. 

In  witness  whereof,  we  have  hereunto  affixed  the  seal  of  said  bank, 
at  Burlington,  this  thirtieth  day  of  March,  a.  d.  1848. 

(Signed)  Farmers'  and  Mechanics'  Bank.        [l.  s.] 

By  John  Peck,  Fres'tP 

The  County  Court  rendered  judgment  for  the  defendant.  Ex- 
ceptions by  plaintiffs. 

[Argument  reported.] 

I-SHAM,  J,  This  action  is  brought  on  two  bills  of  exchange,  drawn 
by  Caleb  E.  Barton  on  the  defendant,  Henry  Rathbone,  of  the  city 
of  New  York ;  both  of  which  were  duly  accepted,  and,  before  matu- 
rity, were  discounted,  and  transferred  by  indorsement  to  the  plain- 

1  Burton  v.  Slaughter,  26  G.ratt.  9U. 


FAEMERS'  AND  MECHANICS'  BANK  V.   EATHBONE.       349 

tiffs.  When  the  bills  matured,  they  were  dishonored,  duly  protested, 
and  notice  thereof  given  to  the  drawer. 

On  the  trial  of  the  case,  at  the  circuit,  the  defendant  insisted 
that  the  bills  were  accommodation  bills;  and,  upon  the  facts  stated 
in  the  bill  of  exceptions,  he  now  insists  that  the  bills  are  of  that 
character,  that  the  drawer  is  the  person  primarily  liable,  that  the 
acceptor  stands  as  his  surety,  and  that  the  release  of  the  drawer 
by  the  plaintiffs  operates  as  a  discharge  of  the  defendant  as  acceptor. 
It  is  admitted  that  if  these  bills  are  not  accommodation  bills,  but  are 
really  bills  for  value,  the  release  will  not  affect  the  liability  of  the 
acceptor.  It  will  discharge  all  persons  intermediate  between  the 
holders  and  drawer,  but  not  those  prior  on  the  bills,  nor  those  on 
whom  rests  a  primary  or  absolute  liability  to  pay  them.  English 
V.  Derby,  2  B.  &  P.  61 ;  Bailey,  J.,  in  Claridge  v.  Dalton,  4  Moore 
&  S.  226;   Chitty,  Bills,  451. 

We  are  satisfied  that  these  bills  are  not  to  be  treated  as  accommo- 
dation papers.  It  is  true  the  fact  is  found  in  the  case,  "  that,  at 
the  maturity  of  the  bills,  the  drawer  was  indebted  to  the  acceptor 
on  account,  apart  from  the  bills  in  suit,  and  that  the  latter  had  no 
funds  in  his  hands  of  the  former,  wherewith  to  meet  them."  But, 
in  connection  with  this  statement,  it  equally  appears  from  the 
exceptions  that,  during  the  season  of  1844,  the  drawer  at  different 
times  consigned  to  the  defendant  as  commission  merchant,  for  sale 
on  his  account,  a  quantity  of  cheese,  the  gross  proceeds  of  which 
amounted  to  $7848.78;  and,  from  the  statement  in  the  account  of 
sales,  we  perceive  that  a  much  larger  amount  than  the  sum  of  these 
bills  was  realized  therefrom,  after  these  acceptances  were  given. 
The  account  arising  from  the  sale  of  this  property  commenced  in 
July,  1844,  and  closed  in  November  of  that  year.  There  has  been 
no  statement  of  that  account  rendered,  or  balance  ascertained  by 
the  parties.  As  between  them,  the  whole  account  remains  open  and 
subject  to  their  future  liquidation.  While  this  account  was  accru- 
ing, these  bills  were  drawn  and  accepted,  obviously  and  with  the 
understanding  that  they  were  to  be  paid  by  the  defendant,  and  the 
amount  so  paid  be  entered  into  their  general  account. 

During  that  period  they  doubtless  anticipated  that  the  balance 
would  be  sufficient  to  pay  these  bills,  and  have  been  respectively 
disappointed  in  the  amount  finally  realized  therefrom ;  so  that  there 
is  now  a  balance  due  the  acceptor,  as  stated  in  the  account  of  sales. 
But  as  these  bills,  at  first,  were  drawn  upon  property  consigned  to 
the  acceptor,  and  he  accepted  them  with  the  same  means  of  knowl- 
edge which  the  drawer  had,  and  thereby  assumed  the  primary  obli- 
gation to  pay  them,  there  is  no  propriety  in  treating  the  bills 
otherwise  than  as  creating  obligations  of  that  character,  after  they 
have  passed,  in  due  course  of  business,  into  the  hands  of  an  indorsee. 
In  so  treating  them,  we  are  manifestly  carrying  into  effect  the  mutual 


350  assurer's  contract. 

intention  of  the  parties  when  the  bills  were  drawn  and  accepted ;  for 
it  is  distinctly  stated  in  the  case  that  both  the  drawer  and  the  drawee 
supposed  and  believed  that  there  were  funds  sufficient  in  the  hands 
of  the  drawee  to  pay  them  at  maturity,  and  under  that  belief  the 
drawer  made  such  representations  to  the  plaintiffs,  at  the  time  of 
their  indorsement  and  discount. 

The  legal  effect  and  character  of  bills  of  exchange,  so  drawn  and 
accepted,  is  not  changed  or  affected  by  any  alteration  of  the  balance 
of  the  account,  not  even  by  the  fact,  if  it  should  be  afterwards  ascer- 
tained, that  there  was  an  indebtedness,  at  the  time  of  the  acceptance, 
from  the  drawer  to  the  acceptor.^  This  principle  is  fully  illustrated 
by  the  case  of  Bagnall  v.  Andrews,  7  Bing.  217.  Indeed,  the  facts 
in  that  case,  and  the  principles  there  established,  have  such  a  direct 
application  to  this  case,  that  we  cannot  consider  these  bills  other- 
wise than  as  bills  for  value,  without  entirely  disregarding  the 
authority  and  principles  of  that  decision.  In  that  case,  when  the 
bill  was  drawn,  the  drawer  had  an  open  account  with  the  acceptor, 
for  goods  which  he  was  in  the  course  of  sending  to  him  for  sale; 
neither  of  them  at  that  time  knew  the  state  of  the  account ;  "  and 
it  afterwards  turned  out  that  the  drawer  was,  at  the  time  of  the 
acceptance,  indebted  to  the  acceptor,  instead  of  the  acceptor  being 
indebted  to  the  drawer."  Before  the  bill  became  due,  the  drawer 
became  bankrupt,  and  indorsed  the  bill  to  the  plaintiff,  who  was 
ignorant  that  an  act  of  banliruptcy  had  been  committed.  The  drawer 
being  called  as  a  witness  was  objected  to  as  being  interested,  on  the 
ground  that  this  was  an  accommodation  bill,  and  that,  if  the  plain- 
tiff recovered,  he  would  be  responsible  to  the  defendant,  not  only  for 
the  amount  of  the  bill,  but  for  the  costs  of  that  suit.  Tindal,  C.  J., 
after  remarking  that  such  consequences  would  follow  if  this  was  an 
accommodation  bill,  and  that  the  witness  would  be  incompetent, 
observed  "  that,  we  think,  upon  the  facts  in  the  case,  the  bill  was 
not  an  accommodation  bill.  At  the  time  it  was  drawn,  the  drawer 
had  an  open  account  with  the  defendant  for  goods  sent,  and  which 
he  was  then  in  the  course  of  sending  to  him  for  sale.  The  drawer 
might,  at  that  time,  reasonably  expect  that  the  acceptor  would  pay 
the  bill  out  of  funds  that  might  be  in  his  hands,  when  the  bill 
arrived  at  maturity;  for  the  evidence  is  express  that,  at  the  time 
the  bill  was  drawn,  neither  the  drawer  nor  acceptor  knew  the  state 
of  the  account.  A  bill  so  drawn  and  accepted  cannot  be  treated  as 
an  accommodation  bill,  nor,  consequently,  is  there  any  implied 
obligation,  on  the  part  of  the  drawer,  to  indemnify  the  acceptor 
against  the  costs  of  anv  action  which  may  be  brought  against  him." 
1  Phil.  Evid.  61 ;  9  Serg.  &  Eawle,  237. 

If  that  case  is  to  be  treated  as  sound  in  principle,  it  makes  a  final 
disposition  of  the  ca?e  under  consideration ;  for  under  that  authority, 

1  Cf.  Dickins  v.  Beal,  10  Peters,  246,  ante,  p.  152. 


farmers'  and   mechanics'   bank   v.   KATIIBONE.  351 

these  bills  cannot  be  considered  as  accommodation  bills,  but  must  be 
treated  as  bills  for  value;  the  acceptor  being  the  party  primarily 
liable,  and  the  drawer  considered  only  as  his  surety  or  guarantor. 
In  such  case,  it  was  properly  remarked  that  the  release  of  the  drawer 
was  a  relinquishment  merely  of  so  much  security  which  the  plaintiffs 
had  for  the  payment  of  the  debt,  and  which  in  no  event  can  affect 
the  liability  of  the  acceptor. 

It  is  very  evident,  also,  that  the  plaintiffs  could  have  sustained 
no  action  against  the  drawer  of  these  bills,  unless  they  had  been 
duly  protested  and  notice  given.  This  principle  is  founded  on  the 
consideration  that  a  primary  liability  for  their  payment  rests  only 
upon  the  acceptor;  while  that  of  the  drawer  is  contingent  and 
collateral,  and  arises  upon  the  default  of  the  acceptor.  The  necessity 
of  protest  and  notice  in  such  cases  is  not  avoided  by  a  fluctuating 
balance  in  their  accounts,  nor  even  by  the  fact,  where  there  exists 
an  open  account,  that  there  is  an  indebtedness  from  the  drawer  to 
the  acceptor.  Orr  v.  Maginnis,  7  East,  359 ;  Blackhaw  v.  Doren, 
2  Camp.  503;  In  re  Brown,  2  Story's  C.  C.  502,  521;  Story,  Bills, 
§  311;  3  Smith's  Lead.  Cas.  29;  Smith's  Merc.  Law,  315;  15 
Peters,  393. 

But  if  these  bills  are  to  be  regarded  strictly  as  accommodation 
bills  the  same  result,  we  think,  must  follow.  In  such  case  it  is 
insisted  that  the  drawer  is  the  person  primarily  liable;  that  the 
acceptor  is  to  be  treated  as  his  surety;  and  that  the  holder  of  the 
bills  is  bound  so  to  regard  and  deal  with  them,  notwithstanding 
the  terms  of  the  bill,  whenever  he  has  notice  that  the  acceptance 
was  for  accommodation,  whether  that  notice  was  received  at  the  time 
he  took  the  bills  or  at  any  subsequent  period. 

It  is  proper  to  observe  that  this  question  does  not  now  arise 
between  the  drawer  and  acceptor;  as  between  them  the  consideration 
may  be  inquired  into  and  the  true  relation  of  the  parties  shown; 
but  the  question  is  presented  in  a  case  between  the  acceptor  and 
an  indorsee  for  value  without  notice  that  the  bill  was  for  accommo- 
dation at  the  time  he  became  the  holder.  When  these  bills  were 
received  by  the  plaintiffs,  they  were  invested  with  those  legal  rights, 
and  became  subject  only  to  those  duties,  that  arose  from  what  ap- 
peared on  the  face  of  the  bills.  Their  legal  effect  and  the  relative 
liability  of  the  drawer  and  acceptor  could  not  be  changed  or  altered 
by  any  fact  not  then  appearing. 

These  principles  have  a  peculiar  application  to  bills  of  exchange, 
as  they  are  designed  for  commercial  purposes;  and  their  applicntion 
is  required  to  impart  to  them  that  credit  and  currency  which  is 
necessary  to  insure  the  purposes  for  which  they  were  intended.  At 
the  time  the  plaintiffs  became  indorsees  they  had  the  risrht,  on  the 
one  hand,  and  were  bound,  on  the  other,  both  at  law  and  in  equity, 
to  regard  the  acceptor  as  primarily  liable,  and  the  drawer  as  his 


352  assurer's  contract. 

surety;  they  could  have  released,  compounded  with,  or  given  time 
to  the  drawer,  without  in  any  way  affecting  their  right  to  hold  the 
ultimate  liability  of  the  acceptor.  Story,  Bills,  §§  429,  430;  15 
Peters,  393;  1  Mees.  &  W.  374.  Such  being  their  right  at  the  time 
they  became  the  holders  of  the  bills,  there  is  no  propriety  or  au- 
thority in  saying  that  that  right  can  be  subsequently  changed,  or 
affected  by  a  mere  notice  from  the  acceptor  to  the  holder  that  the 
drawer  had  neglected  to  provide  funds  for  the  payment  of  the  bills; 
or  by  any  act  of  the  drawer  and  acceptor  to  which  the  plaintiffs 
were  not  a  party,  and  to  which  they  have  never  given  their  assent. 
Theob.  on  Pr.  and  Sur.  216. 

The  plaintiffs,  as  holders  of  these  bills,  were  not  subject  to  any 
of  the  equities  existing  between  the  original  parties,  and  without 
their  assent  those  equities  cannot  be  imposed  upon  them.  The  case 
of  Mallet  V.  Thompson,  5  Esp.  178,  was  an  action  by  an  indorsee 
against  the  maker  of  an  accommodation  note  for  the  payee.  The 
holder  received  part-payment,  under  a  composition  from  the  payee, 
and  covenanted  not  to  sue  him,  which  is  a  virtual  release,  knowing 
when  he  received  the  bill  that  it  was  given  for  accommodation.  Lord 
Ellenborough  ruled  that  the  maker  was  liable,  notwithstanding  the 
payment  and  release;  for  his  liability  on  the  face  of  the  note  was 
primary  and  principal,  and  that  of  the  indorsers  was  collateral  and 
secondary;  and,  whatever  may  be  their  liabilities  between  them- 
selves, such  was  their  liability  to  the  holder.  It  was  also  held  that 
the  release  would  have  no  effect  between  the  maker  and  payee;  for 
whatever  the  maker  was  compelled  to  pay  he  might  call  upon  the 
payee  to  repay;  the  release  in  no  way  disturbed  their  relations. 
On  the  application  of  the  same  rule  to  this  case,  whatever  the 
acceptor  may  be  compelled  to  pay,  he  can  call  upon  the  drawer  to 
repay,  notwithstanding  the  release;  for  their  relations  are  not  dis- 
turbed by  its  execution.  It  is  evident,  also,  in  this  case,  from  the 
release  itself,  that  a  discharge  of  the  bill  was  not  intended  by  the 
parties,  but  simply  a  release  of  the  drawer,  by  the  holders,  from 
any  farther  claim  which  they  had  personally  on  him,  leaving  the 
holders  to  pursue  their  remedy  against  the  acceptor  as  the  party 
primarily  liable.    Story,  Promissory  Notes,  §  423. 

In  the  case  of  Laxton  v.  Peat,  2  Camp.  185,  and  Collett  v.  Haigh, 
3  Camp.  281,  a  different  doctrine  was  applied  to  accommodation 
bills,  where  the  holder,  at  the  time  he  received  the  bills,  knew  that 
they  were  for  the  accommodation  of  the  drawer.  Lord  Ellenborough 
remarked  "  that  as  it  was  an  accommodation  bill,  of  which  all  parties 
had  notice,  the  acceptor  can  only  be  considered  as  a  surety  for  the 
drawer;"  and  the  acceptor  was  discharged  by  time  being  given  the 
drawer.  If  these  cases  can  be  sustained  on  principle,  they  have  no 
application  to  this  case;  for  it  may  be  said  with  more  propriety 
that  if  one  take  a  bill  of  exchange,  knowing  at  the  time  that  it  was 


farmers'  and  mechanics'  bank  v.  rathbone.  353 

for  accommodation,  he  thereby  assents  to  receive  and  hold  it  subject 
to  that  equity  of  the  parties ;  while  no  such  suggestions  can  be  made 
in  this  case,  as  these  plaintiffs  had  no  such  notice  when  the  bills 
were  received  and  discounted. 

The  doctrine  of  those  two  cases  was,  however,  subsequently  shaken 
by  Justice  Gibbs,  in  Kerrison  v.  Cooke,  3  Camp.  362,  and  was  after- 
wards overruled  in  the  Common  Pleas,  in  the  case  of  Fentum  v. 
Pocock,  5  Taunt.  192,  in  which  Mansfield,  C.  J.,  observed  "  that  the 
case  of  Laxton  v.  Peat  was  the  first  in  which  it  was  held  that  the 
acceptor  was  not  the  first  and  last  person  compelled  to  pay  the  bill 
to  the  holder ;  and  that  they  were  compelled  to  differ,  and  hold  that 
it  is  impossible  to  consider  the  acceptor  of  an  accommodation  bill 
in  the  light  of  a  surety  for  the  drawer;  and  that,  if  the  holder  had 
known  in  the  clearest  manner  that  at  the  time  of  giving  the  bill  it 
was  for  accommodation,  it  would  make  no  manner  of  difference." 
With  this  view  of  the  case.  Heath,  J.,  and  Chambre,  J.,  agreed. 
It  will  be  at  once  perceived  that  in  this  case  the  acceptor  was  held 
as  the  principal  and  primary  debtor  on  an  accommodation  bill, 
known  to  be  such  by  the  holder  when  he  received  it,  and  that  act  of 
the  holder,  which  would  have  discharged  a  surety,  was  held  not  to 
affect  his  liability.  We  are  not  called  upon  in  this  case  to  approve 
or  disapprove  of  the  doctrine  of  that  case  to  the  extent  to  which  it 
was  carried ;  but  it  is  a  decided  authority  for  saying  that  an  indorsee 
for  value  of  a  bill  of  exchange,  who  became  such  before  its  maturity 
and  in  ignorance  that  it  was  given  for  accommodation,  has  a  right 
to  treat  all  parties  thereon  as  liable  to  him  according  to  their  relative 
positions  on  the  bill,  and  to  regard  the  acceptor  as  the  principal 
debtor,  and  the  liability  of  the  drawer  as  collateral;  and  that  this 
right  is  unaffected  by  any  subsequently  acquired  knowledge  that  the 
bill  was  given  for  accommodation.  In  such  cases,  it  is  regarded  as 
a  mere  truism  to  say  that  a  release  of  the  drawer  by  the  holder  has 
no  effect  on  the  ultimate  liability  of  the  acceptor. 

The  case  of  Fentum  v.  Pocock  has  been  sustained  and  approved 
by  the  subsequent  cases  in  England.  Price  v.  Edmonds,  10  Bam. 
&  C.  578,  584;  Nichols  v.  Norris,  3  Bam.  &  Adol.  41;  Harrison  v. 
Courtauld,  3  Bam.  &  Adol.  36 ;  Eolfe  v.  Wyatt,  5  Car.  &  P.  181 ; 
Moody  &  M.  14;  Yallop  v.  Ebers,  1  Bam.  &  Adol.  698,  703.  It  is 
to  be  observed  also  that  the  same  view  of  the  subject  is  entertained 
by  the  different  elementary  authors.  Chitty,  Bills,  344;  Smith's 
Merc.  Law,  332;  3  Kent's  Com.  104;  Bayley,  Bills,  364;  Story, 
Promissory  Notes,  §§  418,  423. 

This  subject  has  arisen  before  many  of  the  courts  in  this  country, 
and  the  rule  is  generally  sustained  "  that  the  parties  to  a  bill  or  note 
are  bound  by  the  character  which  they  assume  upon  the  face  of  the 
bill.  If  by  that  they  are  liable  as  primary  debtors  or  as  principal, 
then,  as  to  the  holders,  they  are  bound  as  such;   and  his  knowledge 

23 


354  assurer's  contract. 

at  the  time  when  he  takes  the  bill  that  they  or  either  of  them 
are  accommodation  parties  will  not  vary  the  case."  Montgomery 
Bank  v.  Walker,  9  Serg.  &  Rawle,  229;  s.  c.  12  Serg.  &  Eawle, 
382 ;  White  v.  Hopkins,  3  Watts  &  Serg.  99 ;  Lewis  v.  Ilanchman, 
2  Barr,  416;  Commercial  Bank  v.  Cunningham,  24  Pick.  270,  275; 
Church  V.  Barlow,  9  Pick.  547,  551 ;  In  re  Babcock,  3  Story's  C.  C. 
393;  Sanford  v.  Lambert,  2  Blackf.  137;  Clopper,  Adm'r,  v.  Union 
Bank  of  Maryland,  7  Har.  &  J.  92. 

In  the  case  of  Claremont  Bank  v.  Wood,  10  Vt.  582,  where  several, 
some  of  whom  were  sureties,  signed  a  note,  "  each  as  principals,"  and 
promised  to  pay,  it  was  held  that,  as  to  the  holders,  they  were  to  be 
regarded  as  principals,  and  not  as  sureties;  and  5^et  the  primary 
liability  of  the  acceptor,  and  the  secondary  liability  of  the  drawer, 
is  as  expressly  set  forth  on  these  bills  as  if  it  were  written  out  in  full 
over  their  respective  signatures.  In  either  case,  to  vary  their  re- 
spective liabilities,  as  they  have  assumed  them  on  the  face  of  the  bills 
and  notes,  would  be  to  vary  and  control  their  intended  operation,  and, 
in  effect,  to  enforce  a  contract  which  the  parties  never  made. 

On  this  subject,  it  is  important  to  observe  a  material  distinction 
between  joint  and  several  promissory  notes  or  obligations,  and  bills 
of  exchange  or  notes  on  which  the  parties  have  assumed  only  succes- 
sive liabilities.  In  the  former  case,  as  between  the  makers  and  the 
holders,  who  at  the  time  received  the  note  with  notice  of  the  circum- 
stances under  which  it  was  given,  the  strict  relation  of  principal 
and  surety  may  exist,  and  evidence  of  that  fact  is  not  considered  as 
contradicting  its  specific  provisions,  but  as  consistent  with  its 
terms;  and  the  right  of  contribution  arising  out  of  that  relation 
exists  between  them.  2  Am.  Lead.  Cas.  289,  303,  in  notes.  But 
the  drawer  and  acceptor  and  indorsers  of  a  bill  or  note  have  not 
assumed  a  joint  and  several  liability,  neither  are  they  strictly  sure- 
ties, but  are  liable  to  each  other  in  the  order  of  their  becoming 
parties;  and  when  the  action  is  on  the  bill  or  instrument,  creating 
such  siiccessive  liabilities  by  an  indorsee  for  value,  without  notice 
that  the  bill  was  given  for  accommodation,  such  testimony  is  in- 
admissible for  the  purpose  of  converting  their  successive  liabilities 
into  a  joint  and  several  obligation,  or  placing  them  in  the  relation 
of  principal  and  surety.  The  testimony  clearly  contradicts  the 
express  provision  of  the  bill,  and  materially  changes  its  legal  effect. 
Unquestionably  those  liabilities  may  be  changed  as  between  the 
parties  by  an  express  contract  to  that  effect,  which  may  be  enforced 
between  them.^  But  this  in  no  way  affects  the  rights  of  a  holder, 
who,  at  least,  became  such  in  ignorance  of  that  arrangement.  Under 
such  circumstances  the  holder  has  only  to  look  to  the  bill  itself, 
and  the  genuineness  of  the  signatures,  to  ascertain  the  nature  and 
extent  of  the  liability  of  the  parties  thereon;  and  they  are  liable  to 

1  N.  I.  L.  §  85. 


farmers'  and  mechanics'  bank  v.  rathbone.  855 

him  in  the  successive  order  in  which  their  names  appear  upon  the 
face  of  the  bill.  McDonald  v.  Magruder,  3  Peters,  471;  Flint  v. 
Day,  9  Vt.  345 ;  Brown  v.  Mott,  7  Johns.  361. 

[See  Story  on  Prom.  Xotes,  §  418;  Story,  Bills,  §§  291,  368, 
432,  434;   3  Kent's  Com.  104.] 

As  these  bills  were  received  and  discounted  by  the  plaintiffs  before 
their  maturity,  without  notice  that  they  were  for  accommodation, 
we  are  satisiied,  from  the  authorities,  that  they  had  a  right  to  treat 
the  acceptor  as  the  principal  debtor,  and  the  drawer  as  liable  only 
on  his  default.  In  such  cases,  there  is  no  difference  between  accom- 
modation bills  and  bills  for  value:  in  either  case,  a  release  of  the 
drawer  from  any  fartlier  liability  to  the  holder  will  have  no  effect, 
as  a  discharge  of  the  acceptor  from  his  primary  liability  on  the  bill ; 
and  this  right  so  to  treat  the  parties  on  the  bill  remains  unaffected 
by  any  notice  subsequently  given  that  the  bill  was  for  accommodation. 

It  is  insisted,  however,  that  the  release  of  the  drawer  will  in 
equity  discharge  the  acceptor,  and  that  the  principles  which  pre- 
vail in  that  court  are  now  equally  available  at  law.  From  an 
examination  of  the  cases  in  chancery,  we  entertain  a  decided  convic- 
tion that  the  same  principles,  on  this  subject,  prevail  in  equity  as 
at  law.  If  any  diversity  of  opinion  exists  in  that  court  on  this 
question,  it  has  arisen  more  from  a  misapprehension  of  the  rule 
at  law,  and  a  desire  to  conform  to  the  principles  there  established, 
than  from  any  rules  prevailing  in  equity  at  variance  with  them. 
There  is  much  propriety  in  this;  for  the  principles  regulating  bills 
of  exchange  have  their  origin  in  mercantile  usage,  and  have  been 
adopted  to  meet  the  exigencies  and  wants  of  commercial  trans- 
actions ;  it  is  therefore  equally  the  policy  of  courts  of  equity,  as  of 
courts  of  law,  to  make  the  application  of  and  enforce  those  prin- 
ciples, in  relation  to  these  securities,  which  experience  has  found 
necessary,  to  preserve  their  negotiability  and  credit. 

In  the  case  of  the  Bank  of  Ireland  v.  Beresford,  6  Dow,  233, 
Lord  Eldon  expressed  his  opinion  of  the  case  of  Fentum  v.  Pocock, 
and  observed  that,  "  if  it  went  on  the  principle  that  inquiry  is  not 
to  be  made  into  the  knowledge  of  the  party,  but  that  all  shall  be 
taken  as  appearing  on  the  face  of  the  bill,  I  think  it  a  most  whole- 
some doctrine."  The  case  is  important  only,  as  showing  the  in- 
dividual opinion  of  Lord  Eldon  on  that  question,  and  as  showing 
that  no  different  rule  had  then  prevailed  in  chancery.  In  the  case 
of  Glendinning,  ex  parte,  1  Buck,  517,  Lord  Eldon  refused  to  adopt 
the  principle  of  the  decision  of  Fentum  v.  Pocock,  and  recognized 
the  general  doctrine  as  held  in  Laxton  v.  Peat.  That  was  the  case 
of  an  accommodation  acceptance,  and  known  to  be  such,  by  the 
holder,  when  he  received  the  bill.  We  are,  therefore,  not  called 
upon  to  approve  or  disapprove  of  the  doctrine  of  that  case;   for  in 


356  assurer's  contkaot. 

this  case  the  plaintiffs  had  no  notice,  when  the  bills  were  received 
and  discounted,  that  they  were  for  accommodation. 

If  the  plaintiffs  in  this  case  had  received  the  bills  with  knowl- 
edge that  they  were  given  for  accommodation,  we  do  not  say  but 
that  the  defence  would  be  available;  for  when  one  takes  a  bill, 
even  before  maturity,  with  notice  of  a  given  fact,  it  is  not  unrea- 
sonable that  he  should  be  charged  with  the  consequences  that  result 
therefrom  as  if  the  bill  had  been  received  overdue.  But  that  prin- 
ciple does  not  apply,  when  the  bill  is  taken  before  maturity,  without 
notice  and  for  value;  for  the  bill  is  then  held  independent  of  all 
equities  existing  between  the  original  parties;  and  Lord  Eldon,  in 
that  case,  nowhere  intimates  that  the  principle  would  have  such 
an  application.  It  is  only  to  the  case  of  an  accommodation  bill, 
and  known  to  be  such  by  the  holder  when  he  received  the  bill,  that 
he  made  the  application  of  that  rule. 

The  case,  however,  which  should  and  does  exert  a  controlling  in- 
fluence in  our  decision  of  this  case  is  that  of  Harrison  v.  Courtauld, 
3  Bam.  &  Adol.  36.  That  case,  it  will  be  perceived,  was  sent  from 
chancery  by  the  Master  of  the  Rolls,  for  the  opinion  of  the  Court 
of  King's  Bench.  This  circumstance  alone  creates  the  inference 
that,  in  relation  to  bills  of  exchange,  on  which  the  parties  have 
assumed  successive  liabilities,  the  principles  of  equity  are  the  same 
as  at  law,  and  that,  if  the  acceptor  of  these  bills  is  not  discharged 
at  law,  he  would  not  be  in  equity;  for  it  would  be  an  idle  proceed- 
ing for  chancery  to  send  a  case  to  a  court  of  law  to  ascertain  the 
principles  prevailing  there,  unless  those  principles  have  equal  appli- 
cation in  chancery.  In  that  case,  as  we  have  assumed  in  this,  the 
bill  was  accepted  for  the  accommodation  of  the  drawer,  and  was 
indorsed  for  value  before  its  maturity.  In  that  case,  as  in  this,  the 
holder  was  ignorant  at  the  time  he  received  the  bill  that  it  was 
given  for  accommodation,  but  was  afterwards  informed  of  that  fact, 
before  the  act  was  done  which  the  acceptor  claimed  operated  as  his 
discharge.  It  will  at  once  be  perceived  how  very  similar  are  the  two 
cases  in  every  important  particular.  On  the  hearing  of  that  case, 
the  decisions  at  law  and  in  equity  were  considered;  and  all  the 
judges  —  Tenterden,  C.  J.,  and  Parks,  Taunton,  and  Patterson,  JJ. 
■ — certified  to  the  Court  of  Chancery  that  the  acceptor  was  liable 
on  the  bill  the  same  as  on  a  bill  for  value. 

Whether,  therefore,  we  apply  to  this  case  the  principles  prevailing 
in  equity  or  at  law,  the  result  is  the  same.  The  plaintiffs  having 
no  notice  at  the  time  they  received  the  bills  that  they  were  given  for 
accommodation  had  a  right  to  treat  the  drawer  as  collaterally  liable 
thereon,  and  the  acceptor  as  the  principal  and  primary  debtor;  and 
this  right  of  the  holder  remains  unaffected  by  any  subsequent 
knowledge  which  he  may  have  that  they  were  for  the  accommodation 
of  the  drawer.    Under  such  circumstances,  the  release  of  the  drawer 


farmers'  and  mechanics'  bank  v.  rathbone.  357 

in  no  way  affects  the  liability  of  the  defendant  as  acceptor.  This 
view  of  the  case  renders  it  unnecessary  to  pass  upon  other  questions 
which  were  urged  in  the  argument  of  the  case. 

The  result  is,  that  the  judgment  of  the  County  Court  must  be 
reversed,  and  the  case  remanded. 


358  holder's  position. 


CHAPTER  XI. 

holder's  position. 


PETTEE    V.    PROUT. 

Supreme  Court  of  Massachusetts,  September,  1855.     3  Gray,  502. 

The  possession  of  a  negotiable  instrument,  according  to  the  law  merchant,  raises  a 
presumption  that  the  holder  is  the  owner,  also  a  presumptive  right,  after  maturity,  to 
maintain  an  action  thereon  against  remote  as  well  as  against  immediate  parties. 

Action  of  contract  on  a  promissory  note  for  $50,  dated  March  14, 
1851,  signed  by  the  defendant,  and  payable  in  one  year  to  the 
Cheshire  Iron  Works,  or  bearer,  with  interest.  The  defendant,  in 
his  answer,  denied  that  the  plaintiff  was  the  owner  and  bearer  of 
the  note  sued  upon,  and  alleged  that  it  was  the  property  of  the 
Cheshire  Iron  Works;  and  also  filed  a  declaration  in  set-off  upon 
the  following  note:  "$49.74.  Cheshire,  June  11,  1851.  Six  months 
after  date  we  promise  to  pay  to  the  order  of  Gilman  Bowker,  forty- 
nine  dollars,  ^^,  value  received,  ten  dollars  of  which  is  to  be  paid 
in  goods,  with  interest.  Cheshire  Iron  Works,  by  S.  Pettee,  General 
Agent." 

The  case  was  submitted  to  the  court  upon  a  statement  of  facts, 
in  which  it  was  agreed  that  the  plaintiff  was  the  general  agent  of 
the  Cheshire  Iron  Works;  that  the  two  notes  were  duly  executed 
on  the  days  of  their  respective  dates;  that  the  note  in  set-off  was 
assigned  by  the  holder  thereof  to  the  defendant,  for  a  valuable  con- 
sideration, with  the  intention  of  securing  a  debt  against  the  Cheshire 
Iron  Works;  that  the  Cheshire  Iron  Works  was  insolvent,  and  had 
no  property ;  and  that  the  stockholders,  of  whom  the  plaintiff  was 
one,  were  individually  liable  for  its  debts. 

There  being  no  evidence  to  whom  the  note  sued  upon  belonged, 
beyond  the  note  itself,  the  defendant  contended  that  the  plaintiff 
had  not  proved  his  title  to  the  note;  and  further  contended  that  if 
he  had,  the  note  for  $49.74  should  be  allowed  in  set-off. 

[Argument  not  reported.] 

Shaw,  C.  J.  The  plaintiff  brings  his  action,  as  bearer  of  a  note 
made  by  the  defendant  to  the  Cheshire  Iron  Works,  or  bearer.     He 


PETTEE   V.   PROUT.  359 

therefore  claims  as  the  holder  of  a  negotiable  promissory  note,  paya- 
ble on  time,  and  not  dishonored;  and  if  he  establishes  his  title  by 
proof,  he  is  entitled  to  the  same  privileges  and  immunities  as  an 
indorsee  having  taken  a  note  by  indorsement  in  the  course  of  business, 
before  it  has  become  due.  He  is  not  subject  to  any  equities  as  be- 
tween the  promisor  and  the  original  payee,  nor  to  the  set-off  of  any 
debt,  legal  or  equitable,  which  the  promisor  may  afterwards  acquire. 
Wheeler  v.  Guild,  20  Pick.  545.^  By  giving  a  note  payable  to  bearer 
at  a  future  day,  which  is  strictly  a  negotiable  note,  the  defendant 
agreed  to  pay  the  amount  to  any  person  to  whom  it  should  be  trans- 
ferred, before  the  day  of  payment,  without  claiming  to  set  off  any 
demand  which  he  then  had  or  m^ght  have  against  the  promisee.  It 
is  in  this  respect  like  mercantile  notes  (in  use,  we  believe,  in  some 
of  the  States  where  the  law  allows  set-offs  and  other  equitable  de- 
fences, even  against  indorsees  of  promissory  notes),  payable  "with- 
out defalcation,"  thereby  meaning,  by  force  of  the  contract  itself, 
to  bind  the  maker  to  pay  the  amount  absolutely  to  the  regular  holder, 
and  renouncing  any  benefit  of  set-off  or  other  equitable  defence 
against  the  payee. 

Then  the  question  is  as  to  the  proof.  Where  a  plaintiff  brings 
the  note  declared  upon  in  his  hand,  and  offers  it  in  evidence,  this  is 
not  only  evidence  that  he  is  the  bearer,  but  also  raises  a  presumption 
of  fact  that  he  is  the  owner;  and  this  will  stand  as  proof  of  title, 
until  other  evidence  is  produced  to  control  it.  Ordinarily,  such 
bearer,  relying  on  the  general  presumption,  has  no  means  of  proving 
the  transfer  of  the  note  to  himself. 

The  defendant  contends  that,  as  the  plaintiff  was  the  general 
agent  of  the  corporation  to  whom  the  note  was  payable,  and,  as 
such,  had  the  custody  of  all  their  notes,  his  possession  may  have 
been  the  possession  of  the  corporation.  But  we  think  that  this  fact 
alone  is  not  sufficient  to  rebut  the  general  presumption. 

The  demand  relied  on  by  the  defendant  is  a  note  signed  by  the 
Cheshire  Iron  Works,  payees  of  the  note  in  suit,  and  payable  to 
order;  still  it  was  not  negotiable,  because  payable  in  part  in  goods. 
A  negotiable  note  must  be  payable  in  money.^  But  though  the  de- 
fendant could  not  sue  on  this  note  in  his  own  name,  yet  we  believe 
by  the  Rev.  Sts.  c.  96,  §  5,^  as  the  assignee  of  a  chose  in  action,  the 
holder  of  such  a  note  might  use  it  as  a  set-off,  in  a  proper  case,  as 
against  a  suit  brought  by  the  debtor,  in  the  same  manner  as  if  it 
were  a  le^.^l  del)t.  But  it  is  unnecessary  further  to  remark  on  the 
validitv  of  the  set-off;  the  ground  of  our  decision  is,  that  the  plain- 
tiff held  the  note  in  suit  under  such  a  title  that  no  demand  of  the 

1  Post,  p  461. 

2  See  Ouiiibv  r   Morritt,  11  Humph.  439.  ante,  p.  43;  N.  T.  L.  §  18. 

8  Kev.  Laws  of  Mass.  ch.  174,  §  1.  Cf.  as  to  the  right  of  au  assignee  of  a  common- 
law  chose  in  action  to  maintain  an  action  thereon,  Rev.  Laws,  ch.  173,  §  4. 


360  holder's  position. 

defendant,  legal  or  equitable,  against  the  Cheshire  Iron  Works  could 
avail  him  as  a  set-off. 

Judgment  for  the  plaintiff. 


[The  holder's  right  to  recover,  apart  from  any  question  of  title  or 
ownership,  will  depend,  first,  on  the  character  of  the  defence  set  up, 
—  if  an  absolute  or  real  defence,  he  cannot  recover. 

An  absolute  or  real  defence  is  one  which  denies  the  existence  of 
the  contract,  or  that  it  is  the  contract  of  the  defendant.] 

FOSTER   V.    MACKINNON. 

Common  Pleas  of  England,  July,  1869.     L.  R.  4  C.  P.  704. 

That  the  defendant  signed  the  instrument,  induced  by  fraudulent  representations  that 
it  is  a  contract  of  a  different  character,  is,  in  the  absence  of  negligence,  an  absolute 
defence,  available  even  against  a  bonajide  holder. 

Action  by  indorsee  against  indorser  on  a  bill  of  exchange  for 
£3000,  drawn  on  the  6th  of  November,  1867,  by  one  Cooper  upon 
and  accepted  by  one  Callow,  payable  six  months  after  date,  and 
indorsed  successively  by  Cooper,  the  defendant,  J.  P.  Parker,  T.  A. 
Pooley  &  Co.,  and  A.  G.  Pooley,  to  the  plaintiff,  who  became  the 
holder  for  value  (having  taken  it  in  part-payment  of  a  debt  due  to 
him  from  A.  G.  Pooley)  before  it  became  due,  and  without  notice 
of  any  fraud. 

The  picas  traversed  the  several  indorsements,  and  alleged  that 
the  defendant's  indorsement  was  obtained  from  him  by  fraud. 

The  cause  was  tried  before  Bovill,  C.  J.,  at  the  last  spring  assizes 
at  Guildford.  The  defendant,  who  was  a  gentleman  far  advanced  in 
years,  swore  that  the  indorsement  was  not  in  his  handwriting,  and 
that  he  had  never  accepted  nor  indorsed  a  bill  of  exchange;  but 
there  was  evidence  that  the  signature  was  his ;  and  Callow,  who  was 
called  as  a  witness  for  the  plaintiff,  stated  that  he  saw  the  defendant 
write  the  indorsement  under  the  following  circumstances:  Callow 
had  been  secretary  to  a  company  engaged  in  the  formation  of  a  rail- 
way at  Sandgate,  in  Kent,  in  which  the  defendant  (who  had  property 
in  the  neighborhood)  was  interested;  and  the  defendant  had  some 
time  previously,  at  Callow's  request,  signed  a  guaranty  for  £3000, 
in  order  to  enable  the  company  to  obtain  an  advance  of  money  from 
their  hauliers.  Callow  took  the  bill  in  question  (which  was  drawn 
and  indorsed  by  Cooper)  to  the  defendant,  and  asked  him  to  put 
his  name  on  it,  telling  him  it  was  a  guaranty;  whereupon  the  de- 
fendant, in  the  belief  that  he  was  signing  a  guaranty  similar  to  that 
which  he  had  before  given  (and  out  of  which  no  liability  had  resulted 
to  him),  put  his  signature  on  the  back  of  the  bill,  immediately  after 
that  of  Cooper.    Callow  only  showed  the  defendant  the  back  of  the 


FOSTER   V.  MACKINNON.  361 

paper;  it  was,  however,  in  tlie  ordinary  shape  of  a  bill  of  exchange, 
and  bore  a  stamp,  the  impress  of  which  was  visible  through  the 
paper. 

The  Lord  Chief  Justice  told  the  jury  that,  if  the  indorsement  was 
not  the  signature  of  the  defendant,  or  if,  being  his  signature,  it  was 
obtained  upon  a  fraudulent  representation  that  it  was  a  guaranty, 
and  the  defendant  signed  it  without  knowing  that  it  was  a  bill,  and 
under  the  belief  that  it  was  a  guaranty,  and  if  the  defendant  was  not 
guilty  of  any  negligence  in  so  signing  the  paper,  he  was  entitled  to 
the  verdict. 

The  jury  returned  a  verdict  for  the  defendant.  Eule  nisi  for  a  new 
trial. 

In  the  course  of  the  argument  of  Sir  J.  D.  Coleridge,  Solicitor 
General,  in  favor  of  the  rule,  the  following  was  said:  [Brett,  J. 
Nance  v.  Lary  (5  Ala.  370,  cited  in  Parsons  on  Bills,  114)  seems 
to  be  very  much  to  the  purpose.  In  that  case,  the  defendant  and  one 
Langford  being  about  to  execute  a  bond  in  blank,  the  latter  produced 
a  sheet  of  paper,  upon  which  the  defendant  signed  his  name;  where- 
upon Langford  suggested  that  the  signature  was  so  far  from  the 
bottom  of  the  paper  that  there  might  not  be  room  for  the  bond  to 
be  written  above  it,  and  produced  another  sheet  for  the  defendant 
to  sign  so  as  to  leave  sufficient  room  for  the  intended  bond. 
Langford,  with  apparent  carelessness,  slipped  the  first  sheet  aside, 
and  signed  the  other  with  the  defendant,  who  carried  it  to  the  clerk 
of  the  court  to  be  filled  up,  leaving  the  former  with  Langford,  under 
the  impression  that  it  had  been  or  would  be  destroyed.  Subsequently, 
Langford  caused  the  note  upon  which  the  present  suit  was  brought 
to  be  written  over  the  blank  signature  of  the  defendant  retained  by 
him,  and  negotiated  it  to  the  plaintiff.  Collier,  C.  J.,  said :  "  The 
making  of  the  note  by  Langford  was  not  a  mere  fraud  upon  the 
defendant ;  it  was  something  more.  It  was  quite  as  much  a  forgery 
as  if  he  had  found  the  blank,  or  purloined  it  from  the  defendant's 
possession.  If  a  recovery  were  allowed  upon  such  a  state  of  facts, 
then  every  one  who  indulges  in  the  idle  habit  of  writing  his  name  for 
mere  pastime,  or  leaves  a  sufficient  space  between  a  letter  and  his 
subscription,  might  be  made  a  bankrupt  by  having  promises  to  pay 
money  written  over  his  signature.  Such  a  decision  would  be  alarm- 
ing to  the  community,  has  no  warrant  in  law,  and  cannot  receive  our 
sanction."] 

The  Solicitor-General  then  citing  Swan  v.  North  British  Austra- 
lasian Co.,  2  H.  &  C,  at  p.  184,  that  "honest  acquisition  confers 
title,"  [Byles,  J.  If  that  be  right,  it  can  only  be  with  reference 
to  the  case  of  a  complete  instrument;  it  can  hardly  be  applic^ible 
to  a  case  where  a  man's  signature  has  been  obtained  by  a  fraudulent 
representation  to  a  document  which  he  never  intended  to  sign.] 

Cur.  adv.  vult. 


362  holder's  position. 

Btles,  J.  This  was  an  action  by  the  plaintiff  as  indorsee  of  a 
bill  oi"  exchange  for  £3000  against  the  defendant  as  indorser.  The 
defendant  by  one  of  his  pleas  traversed  the  indorsement,  and  by 
another  alleged  that  the  defendant's  indorsement  was  obtained  from 
him  by  fraud.  The  plaintiff  was  a  holder  for  value  before  maturity, 
and  without  notice  of  any  fraud. 

There  was  contradictory  evidence  as  to  whether  the  indorsement 
was  the  defendant's  signature  at  all;  but,  according  to  tlie  evidence 
of  one  Callow,  the  acceptor  of  the  bill,  who  was  called  as  a  witness 
for  the  plaintiff,  he,  Callow,  produced  the  bill  to  the  defendant,  a 
gentleman  advanced  in  life,  for  him  to  put  his  signature  on  the  back, 
after  that  of  one  Cooper,  who  was  payee  of  the  bill  and  first  indorser, 
Callow  not  saying  that  it  was  a  bill,  and  telling  the  defendant  that 
the  instrument  was  a  guaranty.  The  defendant  did  not  see  the 
face  of  the  bill  at  all.  But  the  bill  was  of  the  usual  shape,  and  bore 
a  stamp,  the  impress  of  which  stamp  was  visible  at  the  back  of  the 
bill.  The  defendant  signed  his  name  after  Cooper's,  he,  the  de- 
fendant (as  the  witness  stated),  believing  the  document  to  be  a 
guaranty  only. 

The  Lord  Chief  Justice  told  the  jury  that,  if  the  indorsement 
was  not  the  defendant's  signature,  or  if,  being  his  signature,  it  was 
obtained  upon  a  fraudulent  representation  that  it  was  a  guaranty, 
and  the  defendant  signed  it  without  knowing  that  it  was  a  bill,  and 
under  the  belief  that  it  was  a  guaranty,  and  if  the  defendant  was  not 
guilty  of  any  negligence  in  so  signing  the  paper,  the  defendant  was 
entitled  to  the  verdict.    The  jury  found  for  the  defendant. 

A  rule  nisi  was  obtained  for  a  new  trial :  first,  on  the  ground  of 
misdirection  in  the  latter  part  of  the  summing  up;  and,  secondly, 
on  the  ground  that  the  verdict  was  against  the  evidence. 

As  to  the  first  branch  of  the  rule,  it  seems  to  us  that  the  question 
arises  on  the  traverse  of  the  indorsement.  The  case  presented  by  the 
defendant  is,  that  he  never  made  the  contract  declared  on ;  that  he 
never  saw  the  face  of  the  bill ;  that  the  purport  of  the  contract  was 
fraudulently  misdescribed  to  him;  that,  when  he  signed  one  thing, 
he  was  told  and  believed  that  he  was  signing  another  and  an  entirely 
different  thing ;   and  that  his  mind  never  went  with  his  act. 

It  seems  plain,  on  principle  and  on  authority,  that,  if  a  blind 
man,  or  a  man  who  cannot  read,  or  who  for  some  reason  (not  im- 
plving  negligence)  forbears  to  read,^  has  a  written  contract  falsely 
read  over  to  him,  the  reader  misreading  to  such  a  degree  that  the 
written  contract  is  of  a  nature  altogether  different  from  the  contract 
pretended  to  be  read  from  the  paper  which  the  blind  or  illiterate 
man  afterwards  signs :  then,  at  least  if  there  be  no  negligence,  the 
signature  so  obtained  is  of  no  force.  And  it  is  invalid  not  merely 
on  the  ground  of  fraud,  where  fraud  exists,  but  on  the  ground 
1  C£.  Walker  v.  Ebert,  29  Wis.  194. 


FOSTER  V.   MACKINNON.  363 

that  the  mind  of  the  signer  did  not  accompany  the  signature;  in 
other  words,  that  he  never  intended  to  sign,  and  therefore  in  con- 
templation of  law  never  did  sign,  the  contract  to  which  his  name 
is  appended. 

The  authorities  appear  to  us  to  support  this  view  of  the  law.  In 
Thoroughgood's  Case,  2  Co.  Eep.  9  h,  it  was  held  that,  if  an  illit- 
erate man  have  a  deed  falsely  read  to  him,  and  he  then  seals  and 
delivers  the  parchment,  that  parchment  is  nevertheless  not  his  deed. 
In  a  note  to  Thoroughgood's  Case,  3  Co.  Eep.  9  h,  in  Fraser's 
edition  of  Coke's  Eeports,  it  is  suggested  that  the  doctrine  is  not 
confined  to  the  condition  of  an  illiterate  grantor;  and  a  case  in  Keil- 
wey's  Eeports  (Keilw.  70,  pi.  6)  is  cited  in  support  of  this  ob- 
servation. On  reference  to  that  case,  it  appears  that  one  of  the 
judges  did  there  observe  that  it  made  no  difference  whether  the 
grantor  were  lettered  or  unlettered.  That,  however,  was  a  case 
where  the  grantee  himself  was  the  defrauding  party.  But  the 
position  that  if  a  grantor  or  covenantor  be  deceived  or  misled  as  to 
the  actual  contents  of  the  deed,  the  -deed  does  not  bind  him,  is 
supported  by  many  authorities :  see  Com.  Dig.  Fait,  B.  2 ;  and  is 
recognized  by  Bayley,  B.,  and  the  Court  of  Exchequer,  in  the  case 
of  Edwards  v.  Brown,  1  C.  &  J.  312.  Accordingly,  it  has  recently 
been  decided  in  the  Exchequer  Chamber  that,  if  a  deed  be  delivered, 
and  a  blank  left  therein  be  afterwards  improperly  filled  up  (at  least 
if  that  be  done  without  the  grantor's  negligence),  it  is  not  the  deed 
of  the  grantor.  Swan  v.  North  British  Australasian  Land  Company, 
2  H.  &  C.  175. 

These  cases  apply  to  deeds;  but  the  principle  is  equally  applicable 
to  other  written  contracts.  Nevertheless,  this  principle,  when  applied 
to  negotiable  instruments,  must  be  and  is  limited  in  its  application. 
These  instruments  are  not  only  assignable,  but  they  form  part  of 
the  currency  of  the  country.  A  qualification  of  the  general  rule  is 
necessary  to  protect  innocent  transferees  for  value.  If,  therefore,  a 
man  write  his  name  across  the  back  of  a  blank  bill-stamp,  and  part 
with  it,  and  the  paper  is  afterwards  improperly  filled  up,  he  is  liable 
as  indorser.  If  he  write  it  across  the  face  of  the  bill,  he  is  liable  as 
acceptor,  when  the  instrument  has  once  passed  into  the  hands  of  an 
innocent  indorsee  for  value  before  maturity,  and  liable  to  the  extent 
of  any  sum  which  the  stamp  will  cover. 

In  these  cases,  however,  the  party  signing  knows  what  he  is  doing : 
the  indorser  intended  to  indorse,  and  the  acceptor  intended  to  accept, 
a  bill  of  exchange  to  be  thereafter  filled  up,  leaving  the  amount,  the 
date,  the  maturity,  and  the  other  parties  to  the  bill  undetermined. 

But,  in  the  case  now  under  consideration,  the  defendant,  according 
to  the  evidence,  if  believed,  and  the  finding  of  the  jury,  never  in- 
tended to  indorse  a  bill  of  exchange  at  all,  but  intended  to  sign  a 
contract  of  an  entirely  different  nature.    It  was  not  his  design,  and. 


364  holder's  position. 

if  he  were  guilty  of  no  negligence,  it  was  not  even  liis  fault,  that 
the  instrument  he  signed  turned  out  to  be  a  bill  of  exchange.  It 
was  as  if  he  had  written  his  name  on  a  sheet  of  paper  for  the  pur- 
pose of  franking  a  letter,  or  in  a  lady's  album,  or  on  an  order  for 
admission  to  the  Temple  Church,  or  on  the  fly-leaf  of  a  book,  and 
there  had  already  been,  without  his  knowledge,  a  bill  of  exchange 
or  a  promissory  note  payable  to  order  inscribed  on  the  other  side  of 
the  paper.  To  make  the  case  clearer,  suppose  the  bill  or  note  on 
the  other  side  of  the  paper  in  each  of  these  cases  to  be  written  at  a 
time  subsequent  to  the  signature;  then  the  fraudulent  misapplica- 
tion of  that  genuine  signature  to  a  different  purpose  would  have 
been  a  counterfeit  alteration  of  a  writing  with  intent  to  defraud, 
and  would  therefore  have  amounted  to  a  forgery.  In  that  case,  the 
signer  would  not  have  been  bound  by  his  signature,  for  two  reasons : 
first,  that  he  never  in  fact  signed  the  writing  declared  on;  and, 
secondly,  that  he  never  intended  to  sign  any  such  contract. 

In  the  present  case,  the  first  reason  does  not  apply,  but  the  second 
reason  does  apply.  The  defendant  never  intended  to  sign  that  con- 
tract, or  any  such  contract.  He  never  intended  to  put  his  name  to 
any  instrument  that  then  was  or  thereafter  might  become  negotiable. 
He  was  deceived,  not  merely  as  to  the  legal  effect,  but  as  to  the 
actual  contents  of  the  instrument. 

We  are  not  aware  of  any  case  in  which  the  precise  question  now 
before  us  has  arisen  on  bills  of  exchange  or  promissory  notes,  or  been 
judicially  discussed.  In  the  case  of  Ingham  v.  Primrose,  7  C.  B. 
N.  s.  83 ;  28  L.  J.  C.  P.  294,  and  the  case  of  Nance  v.  Lary,  5  Ala. 
370,  cited  1  Parsons  on  Bills,  114,  n.,  both  cited  by  the  plaintiff,  the 
facts  were  very  different  from  those  of  the  case  before  us,  and  have 
but  a  remote  bearing  on  the  question.  But,  in  Putnam  v.  Sullivan, 
an  American  case,  reported  in  4  Mass.  45/  and  cited  in  Parsons  on 
Bills  of  Exchange,  vol.  i.  p.  Ill,  n.,  a  distinction  is  taken  by  Chief 
Justice  Parsons  between  a  case  where  an  indorser  intended  to  indorse 
such  a  note  as  he  actually  indorsed,  being  induced  by  fraud  to  in- 
dorse it,  and  a  case  where  he  intended  to  indorse  a  different  note  for 
a  different  purpose.  And  the  court  intimated  an  opinion  that  even 
in  such  a  case  as  that,  a  distinction  might  prevail  and  protect  the 
indorsee. 

The  distinction  in  the  case  now  under  consideration  is  a  much 
plainer  one;  for,  on  this  branch  of  the  rule,  we  are  to  assume  that 
the  indorser  never  intended  to  indorse  at  all,  but  to  sign  a  contract 
of  an  entirely  different  nature. 

For  these  reasons,  we  think  the  direction  of  the  Lord  Chief  Justice 
was  right. 

With  respect,  however,  to  the  second  branch  of  the  rule,  we  are 
of  opinion  that  the  case  should  undergo  further  investigation.    We 

1  Post,  p.  404. 


FOSTER   V.   MACKINNON.  365 

abstain  from  giving  our  reasons  for  this  part  of  our  decision  only 
lest  they  should  prejudice  either  party  on  a  second  inquiry. 
The  rule,  therefore,  will  be  made  absolute  for  a  new  trial. 

Rule  absolute. 

Note.  —  In  Walker  v.  Ebert,  29  Wis.  194,  suit  was  brought  by  a  bona  fde 
holder  of  a  negotiable  promissory  note  against  the  maker.  The  defendant 
offered  to  prove  that  he  was  a  foreigner  and  unable  to  read  or  write  the  Eng- 
lish language ;  and  that  he  was  induced  by  the  payees  of  the  note,  to  sign  a 
contract  which  he  supposed,  was  a  contract  of  agency,  but  which,  in  fact  was 
the  instrument  sued  on.  The  court  rejected  this  evidence  and  gave  judgment 
for  the  plaintiff. 

In  reversing  this  judgment,  Dixon,  C.  J.,  said:  "The  inquiry  in  such 
cases  goes  back  of  all  questions  of  negotiability,  or  of  the  transfer  of  the  sup- 
posed paper  to  a  purchaser  for  value,  before  maturity  and  without  notice.  It 
challenges  the  origin  or  existence  of  the  paper  itself ;  and  the  proposition  is, 
to  show  that  it  is  not  in  law  or  in  fact  what  it  purports  to  be,  namely,  the 
promissory  note  of  the  supposed  maker.  For  the  purpose  of  setting  on  foot 
or  pursuing  this  inquiry,  it  is  immaterial  that  the  supposed  instrument  is 
negotiable  in  form,  or  that  it  may  have  passed  to  the  hands  of  a  bona  Jide 
holder  for  value.  Negotiability  in  such  cases  presupposes  the  existence  of  the 
instrument  as  having  been  made  by  the  party  whose  name  is  subscribed;  for, 
until  it  has  been  so  made  and  has  such  actual  legal  existence,  it  is  absurd  to 
talk  about  a  negotiation,  or  transfer,  or  bona  Jide  holder  of  it,  within  the  mean- 
ing of  the  law  merchant.  That  which,  in  contemplation  of  law,  never  existed 
as  a  negotiable  instrument,  cannot  be  held  to  be  such ;  and  to  say  that  it  is, 
and  has  the  qualities  of  negotiability,  because  it  assumes  the  form  of  that  kind 
of  paper,  and  thus  to  shut  out  all  inquiry  into  its  existence,  or  whether  it  is 
really  and  truly  what  it  purports  to  be,  is  petitio  principii,  —  begging  the  ques- 
tion altogether.  ...  It  must  always  be  competent  for  the  party  proposed  to 
be  charged  upon  any  written  instrument  to  show  that  it  is  not  his  instrument 
or  obligation.  The  principle  is  the  same  as  where  instruments  are  made 
by  persons  having  no  capacity  to  make  binding  contracts,  as,  by  infants,  mar- 
ried women,  or  insane  persons  ;  or  where  they  are  void  for  other  cause,  as,  for 
usury ;  or  where  they  are  executed  as  by  an  agent,  but  without  authority  to 
bind  the  supposed  principal.  In  these  and  all  like  cases,  no  additional  valid- 
ity is  given  to  the  instruments  by  putting  them  in  the  form  of  negotiable 
paper." 

But  the  question  of  negligence  is  of  great  importance  in  such  cases  as  that 
of  Foster  i'.  Mackinnon,  supra,  for  one  is  not  to  be  allowed,  lightly,  to  deny 
that  a  contract  which  one  has  signed,  is  really  one's  contract.  And  if  a  man 
.signs  a  contract  which  he  does  not  read,  and  he  is  not  induced  to  refrain  from 
so  doing  by  the  fraud  of  one  upon  whom  he  can  reasonably  be  entitled  to  rely, 
he  will  be  bound  by  the  terms  of  the  contract.  Thus  in  Chapman  i\  Rose,  56 
N.  Y.  137,  the  defendant,  having  signed  a  contract  of  agency  with  one  M., 
signed,  without  reading  it,  what  he  supposed  was  a  copy  of  the  contract,  in- 
duced by  the  statement  of  M.  to  that  effect.  The  instrument  which  he  had 
thus  signed  was,  however,  a  negotiable  promissory  note,  of  which  the  plaintiff 
was  a  bona  Jide  holder. 

In  reversing  a  judgment  for  the  defendant,  Johnson,  J.,  said  :  "  There  does 
not  appear  to  have  been  any  physical  obstacle  to  the  defendant's  reading  the 
paper  before  he  signed  it.     He  understood  that  he  was  signing  a  paper  by 


366  holder's  position. 

which  he  was  about  to  incur  an  obligation  of  some  sort,  and  he  abstained  from 
reading  it.  He  liad  the  power  to  know  with  certainty  the  exact  obligation  he 
-was  assuming,  and  chose  to  trust  the  integrity  of  the  person  with  whom  he 
■was  dealing,  instead  of  exercising  his  own  power  to  protect  himself.  It  turns 
out  that  he  signed  a  promissory  note,  and  that  it  is  now  in  the  hands  of  a 
holder  in  "ood  faith,  for  value.  The  question  which  arises  on  the  branch  of 
the  charge  now  under  consideration  is,  whether  it  is  enough,  as  against  a  bona 
Me  holder,  to  show  that  he  did  not  know  or  suppose  that  he  was  signing  a 
note,  unless  it  also  appears  that  he  was  guilty  of  no  laches  or  negligence  in 
sitininfr  the  instrument.  ...  It  is  quite  plain  that  if  the  law  is  that  no  such 
inquiry  is  admissible,  a  serious  blow  will  have  fallen  upon  the  negotiability 
of  paper.  It  will  be  a  premium  offered  to  negligence.  ...  To  avoid  such 
evils  it  is  necessary,  at  least,  to  hold  firmly  to  the  doctrine  that  he  who,  by 
his  carelessness  or  undue  confidence,  has  enabled  another  to  obtain  the  money 
of  an  innocent  person,  shall  answer  the  loss." 


MOERIS    V.    BETHELL. 

Court  of  Common  Pleas  of  England,  Michaelmas,  1869.     L.  R.  5  C.  P.  47. 

So  is  the  forgery  of  the  defendant's  signature,  unless  the  defendant  is  estopped  to 
Bet  up  that  fact.i 

Action  against  the  acceptor  of  a  bill  of  exchange  for  £400,  dated 
22d  of  July,  1868,  drawn  by  Richard  Bethell,  payable  three  months 
after  date,  and  indorsed  by  Bethell  to  the  plaintiff.  Plea,  denial  of 
the  alleged  acceptance.     Issue  thereon. 

The  facts  were  as  follows:  In  May,  1867  the  plaintiff  discounted 
for  Richard  Bethell  a  bill  for  £300,  purporting  to  be  drawn  by 
Richard  Bethell  upon  the  defendant  and  to  be  accepted  by  the  latter, 
payable  at  his  bankers,  Coutts  &  Co. ;  which  bill  was  at  its  maturity, 
viz.,  on  the  5th  of  August,  1867,  paid  by  Messrs.  Coutts  &  Co.,  by 
authority  of  the  defendant.  Upon  the  faith  of  the  former  bill  having 
been  duly  honored  by  the  defendant,  the  plaintiff  also  discounted 
for  Richard  Bethell  the  bill  declared  on.  The  defendant  had  in 
June  and  July,  1867,  before  maturity,  paid  two  other  bills  similarly 
drawn,  and  purporting  to  be  accepted  by  him.  The  defendant,  who 
was  called  as  a  witness,  swore  that  all  these  acceptances  were  forg- 
eries, that  the  acceptances  were  unauthorized  by  him,  and  that  he 
did  not  know  that  the  plaintiff  was  the  holder  of  the  bill  for  £300 
which  was  paid  in  August,  1867.  He  further  stated  that  he  had 
paid  the  former  bills  in  order  to  avert  from  his  brother  the  conse- 
quences of  his  act,  and  upon  his  solemn  promise  that  it  should  not 
be  repeated.    It  did  not  appear  that  the  plaintiff  was  aware  of  the 

1  N.  I.  L.  §  40. 


MORRIS   V.   BETHELL.  3G7 

pa}Tncnt  of  the  two  bills  in  June  and  July,  1867,  or  that  he  made 
any  inquiry  before  he  took  the  bill  in  question. 

On  the  part  of  the  plaintiff  it  was  contended  that  the  defendant 
having  paid  the  bill  which  the  plaintiif  held  in  August,  1867,  ad- 
mitted thereby  that  the  acceptance  was  genuine,  and,  in  the  absence 
of  notice  to  the  plaintiif,  was  estopped  from  denying  that  the  bill 
declared  on  was  accepted  by  him  or  with  his  authority. 

The  Lord  Chief  Justice,  though  pressed  by  the  Solicitor  General,^ 
on  behalf  of  the  defendant,  to  do  so,  refused  to  nonsuit  the  plaintiff; 
and  the  jury,  in  answer  to  questions  left  to  them,  found  that  the 
acceptance  to  the  bill  declared  on  was  not  the  defendant's  signature, 
nor  authorized  nor  adopted  by  him;  that  he  did  not  know  that  the 
plaintiff  had  held  the  former  bill  of  August,  1867,  and  that  he  did 
not  lead  the  plaintiff  to  believe  that  the  acceptance  to  the  bill  in 
question  was  his  signature,  or  was  authorized  by  him. 

A  verdict  was  thereupon  entered  for  the  defendant;  leave  being 
reserved  to  the  plaintiff  to  move  to  enter  a  verdict  for  him  for  the 
amount  of  the  bill  and  interest,  if  the  court  should  be  of  opinion  that 
the  Lord  Chief  Justice  was  bound  to  hold,  as  matter  of  law,  that 
upon  the  foregoing  facts  the  plaintiff  was  entitled  to  a  verdict. 

[Argument  reported.] 

BoviLL,  C.  J.  At  the  trial  the  plaintiff's  counsel  contended  that 
the  defendant  was  estopped  from  denying  that  the  acceptance  to  the 
bill  declared  on  was  his,  the  Solicitor  General,  on  the  other  hand, 
contending  that  I  ought  to  nonsuit  the  plaintiff.  I  declined  to  with- 
draw the  case  from  the  jury,  because  I  thought  there  was  evidence 
for  them,  though  extremely  slight.  I  now  entertain  some  doubt 
whether  I  ought  to  have  left  the  case  to  the  jury  at  all.  They, 
however,  found  that  the  acceptance  in  question  was  not  the  defend- 
ant's signature,  nor  affixed  to  the  bill  with  his  authority,  and  that 
the  false  signature  was  not  adopted  by  the  defendant;  and  they 
further  found  that  the  defendant  did  not  know  that  the  plaintiff 
was  the  holder  of  the  £300  bill  paid  in  August,  1867.  With  reference 
to  the  alleged  holding  out,  the  jury  also  found  that  the  defendant 
did  not  lead  the  plaintiff  to  believe  that  the  acceptance  was  his 
signature.  If  then  the  question  was  for  the  jury,  it  has  been  decided 
against  the  plaintiff. 

Mr.  Huddleston  now  insists  that  I  was  bound  to  rule,  nc;  rnatter 
of  law,  that  upon  the  facts  proved  the  plaintiff  was  entitled  to  the 
verdict;  and  that  is  the  question  which  by  consent  was  rp^^-^Tverl  by 
me  for  the  court.  I  am  of  opinion  that  the  finding  of  the  jury 
disposes  of  the  case.     The  only  ground  upon  which  a  man  can  be 

1  Sir  John  Duke  Coleridge, 


368  holder's  position. 

held  responsible  as  the  acceptor  of  a  bill  signed  by  another  in  his 
name  is,  that  he  has  authorized  or  adopted  the  signature,  or  has  so 
conducted  himself  as  to  be  estopped  from  disputing  it.  Now,  what 
had  the  defendant  done  here?  He  had  on  a  former  occasion  paid 
a  bill  of  which  the  plaintiff  was  the  holder,  and  which  had  been 
similarly  accepted  in  his  name  without  his  authorit}-;  and  it  is 
contended  that  he  thereby  held  out  to  the  plaintiff  that  he  would 
treat  as  genuine  and  pay  all  bills  so  accepted.  There  was  no  evidence 
that  the  defendant  ever  knew  that  the  plaintiff  was  the  holder  of  the 
former  bill;  and  the  plaintiff  seems  to  have  made  no  inquiry  when 
he  discounted  the  bill  in  question.  If  it  were  made  to  appear  that 
there  has  been  a  regular  course  of  mercantile  business,  in  which  bills 
have  been  accepted  by  a  clerk  or  agent  whose  signature  has  been 
acted  upon  as  the  signature  of  his  principal,  there  would  be  evidence, 
and  almost  conclusive  evidence,  against  the  latter  that  the  acceptance 
was  written  by  his  authority  That  was  the  case  of  Barber  v.  Gingell, 
3  Esp.  60.  It  would  have  been  idle  to  contend  there  that  the  defend- 
ant was  not  responsible  for  the  signature.  The  report  is  short; 
but  I  do  not  understand  it  to  have  been  treated  as  matter  of  law, 
but  rather  as  a  conclusion  of  fact  by  the  jury.  Here  the  transaction 
was  not  one  of  a  mercantile  character;  there  was  no  business  be- 
tween the  parties. 

What  then  does  the  payment  of  one  bill  under  such  circumstances 
hold  out?  Is  it  that,  as  matter  of  law,  the  party  binds  himself  to 
pay  all  further  bills  which  may  assume  to  bear  his  acceptance,  whether 
authorized  by  him  or  not?  I  should  be  sorry  to  affirm  any  such 
principle;  and  I  think  no  jury  could  safely  act  upon  the  notion  of 
authority  or  adoption  under  such  circumstances.  The  utmost  extent 
of  the  doctrine,  as  it  seems  to  me,  is  that  it  is  a  question  for  the 
jury.  Indeed,  in  all  the  cases  cited  by  Mr.  Huddleston  the  question 
was  left  to  the  jury.^  If  the  defendant  had  by  his  conduct  led  the 
plaintiff  to  suppose  that  the  acceptance  was  his  genuine  signature, 
or  was  authorized  by  him,  he  might  be  estopped  from  disputing  it; 
otherwise  not.  But  that  was  especially  a  question  for  the  Jury.  It 
was  put  to  the  jury,  and  they  negatived  it,  and,  as  I  think,  properly 
negatived  it.  At  all  events  there  was  no  evidence  upon  which  the 
judge  would  have  been  warranted  in  acting  upon  his  own  responsi- 
bility and  holding  that,  as  matter  of  law,  the  plaintiff  was  entitled 
to  a  verdict.    The  rule  must  therefore  be  refused. 

WiLLES,  Keating,  and  Brett,  JJ.,  concurred. 

Rvle  refused. 

*  The  following  cases,  and  some  others,  were  cited :  Barber  v.  Gingell,  supra ; 
Keane  v.  Rogers,  9  Barn.  &  C.  577,  586 ;  Graves  i».  Key,  3  Barn.  &  Ad.  313  ;  Pickard 
V.  Sears,  6  Ad.  &  E.  469;  Gregg  v.  Wells,  10  Ad.  &  E.  90;  Freeman  v.  Cooke,  2  Ex. 
654  ;  Ryan  v.  Sama,  12  Q.  B.  460 ;  Cornish  v.  Abington,  4  Hurl.  &  N.  549.  See  Bige- 
low,  Estoppel,  5th  ed.,  pp.  558,  559. 


BAYLEY  V.   TABER.  369 

BAYLEY  V.   TABEK. 

Supreme  Court  of  Massachusetts,  May,  1809.     5  Mass.  286. 

So,  commercial  paper  declared  void  by  statute  is  void  even  in  the  hands  of  a  bona 
fide  holder  for  value. 

The  declaration  in  this  action  contained  thirty-seven  counts  upon 
as  many  promissory  notes,  alleged  to  have  been  made  by  the  defend- 
ants, each  under  five  dollars,  payable  to  bearer  on  demand  for  value 
received,  and  bearing  date  between  the  third  day  of  October  and  the 
thirtieth  day  of  December,  1804.     Plea,  the  general  issue. 

At  the  trial,  notes  comporting  with  the  several  counts  were  pro- 
duced in  evidence,  all  bearing  the  impression  of  plates,  types,  or 
printing.  The  signature  of  the  defendants  to  all  of  them  was  ad- 
mitted. The  defendants  offered  to  prove  that  some  of  the  notes 
declared  on  were  in  fact  made  and  issued  by  them  after  the  first 
day  of  April,  1805,  though  bearing  date  before  that  day ;  and  that 
the  notes  which  had  been  so  made  were  antedated  by  them,  to  avoid 
the  operation  of  the  Statute  of  1804,  c.  58,  which  declares  notes 
of  the  like  description,  made  or  issued  after  that  day,  to  be  utterly 
void. 

[Argument  reported.] 

Parker,  J.  This  cause  was  tried  before  me  at  the  sittings  after 
the  last  law  term  in  Cumberland,  in  May  last;  and  I  then  inclined 
to  the  opinion  that  the  defendants  should  not  be  permitted  to  allege 
a  falsity  in  an  instrument  made  and  signed  by  themselves,  and  which 
had  by  them  been  put  into  general  circulation  as  money.  Notes  of 
this  description,  under  the  denomination  of  Taber's  notes,  to  a  large 
amount,  having  become  a  common  currency  in  the  district  of  Maine, 
it  suddenly  struck  me  as  inconsistent  with  the  common  principles 
of  justice,  and  the  policy  of  the  law,  that  the  promisors  in  those  notes 
should  be  allowed  to  avoid  payment  of  them  to  an  innocent  holder, 
by  alleging  that  they  bore  false  dates,  and  by  showing  that  in  utter- 
ing them  they  had  contravened  the  laws  of  the  Commonwealth. 

I  therefore  rejected  the  evidence  offered;  but  very  soon  after  the 
trial,  having  revolved  the  question  in  my  mind  at  more  leisure,  I 
came  to  doubt  of  the  correctness  of  my  opinion,  and  intimated  my 
desire  to  the  counsel  that  the  question  should  be  reserved  for  the 
consideration  of  the  whole  court.  This  was  done  in  such  manner 
as  to  cause  very  little  delay,  and  no  inconvenience  to  the  parties  or 
their  counsel;  it  having  been  agreed  that  the  question  should  be 
taken  up  by  the  court  at  this  adjourned  session,  and  that  the  argu- 
ments of  the  counsel  should  be  reduced  to  writing,  and  transmitted 
to  the  court. 

Upon  an  attentive  consideration  of  the  question,  and  of  the  argu- 

24 


370  holder's  position. 

> 

nients  sent  to  us,  which  on  both  sides  are  concise  and  perspicuous, 
we  are  unanimously  and  clearly  of  opinion  that  the  facts  proposed 
by  the  defendants  to  be  proved  to  the  jury  at  the  trial,  constitute 
a  good  defence  against  the  counts  to  which  those  facts  are  applicable, 
and  that  it  is  competent  to  the  defendants  in  this  action  to  set  up 
and  maintain  such  defence. 

The  Statute  of  1804,  c.  58,  §  1,  enacts  that  all  bills,  notes,  cheques, 
drafts,  or  obligations  whatsoever,  under  the  amount  of  five  dollars, 
payable  to  bearer  or  to  order,  shall  be  wholly  in  writing;  and  that 
all  notes,  etc.,  under  the  aforesaid  amount,  and  payable  as  aforesaid, 
which  should  be  made  or  issued  after  the  first  day  of  April  then 
next,  and  which  should  bear  the  impression  of  types,  plates,  or 
printing,  should  be  utterly  void,  and  that  no  action  should  be  thereon 
sustained  in  any  court  of  law. 

The  second  section  of  the  same  statute  imposes  a  penalty  upon 
any  person  who  should  issue  or  pass  any  of  the  securities  described 
in  the  first  section,  after  the  said  first  day  of  April,  which  was  April, 
1805. 

The  same  statute,  c.  134,  imposed  an  increased  penalty  upon  any 
person  who  should,  after  the  tenth  day  of  the  same  April,  issue  or 
pass  like  notes,  other  than  those  of  incorporated  banks,  for  a  less 
sum  than  five  dollars  or  whereon  less  than  five  dollars  should  be  due, 
with  intent  that  the  same  should  be  circulated  as  currency. 

The  statute  first  cited  is  peremptory  and  unequivocal,  in  enacting 
that  all  notes  like  those  declared  on  in  this  action,  made  or  issued 
after  the  first  day  of  April,  1805,  shall  be  utterly  void;  and  it  pro- 
hibits the  sustaining  of  any  suit  upon  them  in  any  court  of  law. 
The  defendants  say,  and  they  ofi'ered  to  prove,  that  some  of  the  notes 
sued  in  this  action  ivere  made  and  issued  after  that  day.  To  reject 
the  proofs  of  these  facts,  because  the  defendants  are  the  original 
promisors,  and  because  the  plaintiffs  may  be  supposed  to  be  innocent 
holders  of  the  notes  for  valuable  considerations,  would  be,  to  all 
intents  and  purposes,  to  defeat  the  operation  of  the  statute,  and 
would  amount  to  a  judicial  repeal  of  an  act  of  the  legislature. 

The  maker  of  a  note  payable  to  bearer  is  generally  the  only 
person  to  be  called  upon  for  payment,  it  passing  from  hand  to  hand, 
on  the  credit  of  the  promisor's  name,  like  bank-bills,  the  receiver 
seldom  requiring  any  guaranty  from  him  who  passes  it.  Now,  the 
declared  object  of  the  legislature  was  entirely  to  prevent  the  circu- 
lation of  such  paper.  But  if,  by  giving  a  fictitious  date  to  them,  the 
maker  is  prevented  from  showing  that  they  were  made  or  issued  after 
the  time  when  they  were  declared  by  the  statute  to  be  void,  they 
would  continue  to  circulate,  as  long  as  there  should  be  confidence  in 
the  ability  of  the  makers  to  pay  them. 

However  hard  the  operation  of  the  statute  may  appear  to  bo  against 
persons  into  whose  possession  such  notes  may  have  come  lona  fide 


BAYLEY   V.  TABER.  371 

and  for  a  valuable  consideration,  it  is  a  hardship  created  by  law  for 
the  public  good,  and  the  courts  of  law  are  prohibited  from  granting 
any  relief  against  it. 

Nor  is  it  altogether  certain  that  the  receivers  of  such  notes  are 
free  from  blame,  although  not  privy  to  the  actual  making  or  ante- 
dating of  them.  The  laws  of  the  government  are  presumed  to  be 
known  by  all  the  citizens.  If  the  notes  were  in  fact  made  or  issued 
after  they  were  declared  void  by  statute,  and  after  a  penalty  was 
attached  to  the  passing  of  them,  although  no  penalty  is  expressly 
enacted  against  the  receiver;  yet  the  act  of  receiving  was  necessary 
to  enable  the  offender  to  pass  them,  and  in  this  view  the  receiver 
may  be  considered  as  having  aided  in  the  offence  of  passing.  Nor 
is  it  improbable  that  the  legislature  contemplated  the  punishment 
of  the  receiver,  when  they  took  from  him  all  power  of  coercing  pay- 
ment of  such  notes  in  the  courts  of  law.  But  be  this  as  it  may, 
whether  the  plaintiffs  in  this  action  are  innocent  or  not,  to  authorize 
them  to  maintain  a  suit,  and  recover  judgment  on  notes  of  this 
description  so  situated,  when  the  legislature  has  declared  them  to  be 
utterly  void,  would  be  effectually  to  annul  an  act,  the  wisdom  and 
policy  of  which  the  legislature  alone  had  the  right  to  determine. 

Nor  is  it  a  novel  doctrine  that  a  person  shall  be  permitted  to  avoid 
his  contract  by  alleging  his  own  criminality,  provided  it  consists  in 
the  violation  of  some  positive  statute  of  the  government.  Contracts, 
the  consideration  of  which  is  money  won  at  play,^  or  loaned  at  un- 
lawful interest,  have  always  been  subject  to  the  same  rule,  not  only 
against  those  who  participated  in  the  offence,  but  even  against 
innocent  indorsees,  when  they  have  claimed  the  performance  of  such 
contracts. 

The  case  of  Lowe  v.  Waller,  2  Doug.  736,  shows  this  long  to  have 
been  the  law  in  England ;  and  it  is  understood  that  the  like  principle 
has  been  uniformly  adopted  and  practised  upon  by  the  courts  in 
this  country. 

It  has  been  suggested  by  the  counsel  for  the  plaintiffs  in  the  close 
of  their  argument  that,  to  make  this  a  good  defence,  it  should  have 
been  specially  pleaded.  But  it  is  not  necessary;  for  in  assumpsit, 
everything  which  destroys  the  right  of  action  may  be  given  in  evi- 
dence under  the  general  issue. 

Indeed,  there  seems  to  be  no  room  to  doubt  upon  this  question; 
and  nothing  but  a  reluctance  to  permit  a  man  to  avail  himself  of  a 
falsity  in  circulating  these  notes,  and  afterwards  to  avoid  payment 
by  showing  the  truth,  could  have  caused  a  hesitation  at  the  trial. 

The  verdict  must  be  set  aside,  and  a 

New  trial  granted. 

1  But  see  Rev.  Laws  of  Mass.,  ch.  99.  §  3,  that  notes,  bills,  etc.,  the  consideration 
of  which  is  money  won  by  gaming,  shall  be  void  between  the  parties  thereto  and  as  to 
all  persons,  except  those  who  hold  them  in  good  faith,  without  notice  of  the  illegality. 


372  holder's  position. 


[If  no  absolute  defence  is  set  up,  the  holder's  right  to  recover  will 
depend  upon  the  question,  whether  he  is  a  tona  fide  holder. 

A  bona  fide  holder  is  one  who  has  taken  the  instrument  for  value, 
in  good  faith  and  before  maturity.^] 

BAY   V.    CQBBINGTON. 

Court  of  Chancery  of  New  York,  January,  1821.     5  Johns.  Ch.  54. 

By  the  law  inerchant,  a  pre-existing  debt  is  a  valuable  consideration  for  the  trans- 
fer of  a  negotiable  instrument.^  In  some  jurisdictions,  if  the  instrument  is  transferred 
as  security  for  such  antecedent  debt,  it  is  deemed  not  to  be  given  for  value.^ 

The  plaintiff  being  owner  of  a  vessel,  employed  Eandolph  & 
Savage,  defendants,  who  were  carpenters,  to  sell  her  on  a  credit, 
and  take  good  notes  in  payment,  and  transmit  the  same  to  him,  with 
an  account  of  their  charges,  which  he  would  pay.  E.  and  S.  sold 
the  vessel  for  $3875,  and,  on  the  3d  of  June,  1819,  received  the 
notes  of  the  purchasers,  payable  in  two,  three,  and  four  months, 
some  of  them  being  made  payable  to,  and  indorsed  by,  P.  Aymar 
&  Co.,  and  the  others  by  J.  E.  Stewart.  On  the  12th  of  June,  isiO, 
E.  and  S.  delivered  the  notes  so  indorsed  to  the  defendants,  J.  and  C. 
Coddington,  who  were  at  that  time,  as  they  stated  in  their  answer, 
under  heavy  responsibilities  for  E.  and  S.,  as  indorsers  of  notes  for 
their  accommodation,  payable  at  different  times,  but  all  subsequent 
to  the  12th  of  June,  1819,  which  they  were  afterwards  obliged  to 
take  up  as  they  fell  due,  amounting  to  $17,000.  The  answers  ad- 
mitted that  E.  and  S.  had  stopped  payment,  when  the  notes  so  held 
by  them  were  to  be  delivered  to  J.  and  C.  Coddington. 

The  defendants,  J.  and  C.  Coddington,  denied  all  knowledge  of 
the  manner  in  which  the  notes  had  come  to  the  hands  of  E.  and  S., 
and  alleged  that  they  believed  that  they  were  the  bona  fide  and 
exclusive  property  of  E.  and  S. ;  that  they  received  these  notes,  with 
others,  as  a  guaranty  and  indemnity,  as  far  as  they  would  avail,  for 
their  responsibilities ;  and,  three  days  after,  disposed  of  some  of  the 
notes  for  cash,  and  did  not  know,  until  several  days  afterwards,  that 
the  notes  belonged  to  the  plaintiffs,  as  stated  in  the  bill.  They  ad- 
mitted that,  when  they  so  received  the  notes,  E.  and  S.  were  not,  in 
a  strict  legal  sense,  indebted  to  them;  but  that  they  were  under 
large  gratuitous  responsibilities  for  them. 

No  proofs  were  taken,  and  the  cause  came  on  to  be  heard  on  the 
pleadings  only. 

[Argument  reported.] 

Kent,  Chancellor.  It  is  admitted  that  Eandolph  &  Savage  held 
the  notes  belonging  to  the  plaintiff,  which  they  transferred  to  the 

1  N.  I.  L.  §  69.  «  Id.  §  42.  «  See  Bigelow,  Bills  and  Notes,  ch.  xvii.  §  3. 


BAY   V.   CODDINGTON.    .  373 

defendants,  J.  and  C.  Coddington,  on  the  12th  of  June,  1819,  as 
agents  or  trustees  for  the  plaintiff,  and  that  they  had  no  authority 
to  pass  them  away.  It  was  a  gross  and  fraudulent  abuse  of  trust,  on 
the  part  of  E.  and  S.  The  only  question  now  is,  whether  J.  and 
C.  C.  are  entitled,  under  the  circumstances  disclosed,  to  hold  the 
notes,  and  retain  the  amount  of  them  as  against  the  plaintiff. 

Negotiable  paper  can  be  assigned  or  transferred  by  an  agent  or 
factor,  or  by  any  other  person,  fraudulently,  so  as  to  bind  the  true 
owner  as  against  the  holder,  provided  it  be  taken  in  the  usual  course 
of  trade,  and  for  a  fair  and  valuable  consideration,  without  notice 
of  the  fraud.  But  the  defendants,  J.  and  C.  C,  have  not  entitled 
themselves  to  the  protection  of  holders  of  that  description.  The 
notes  were  not  negotiated  to  them  in  the  usual  course  of  business 
or  trade,  nor  in  payment  of  any  antecedent  and  existing  debt,  nor 
for  cash,  or  property  advanced,  debt  created  or  responsibility  in- 
curred, on  the  strength  and  credit  of  the  notes.  They  were  received 
from  E.  and  S.,  and  after  they  had  stopped  payment,  and  had  become 
insolvent  within  the  knowledge  of  J.  and  C.  C,  and  were  seized 
upon  by  the  Coddingtons,  as  tabula  in  naufragio,  to  secure  themselves 
against  contingent  engagements,  previously  made  for  E.  and  S.,  and 
on  which  they  had  not  then  become  chargeable.  There  is  no  case 
that  entitles  such  a  holder  to  the  paper,  in  opposition  to  the  title 
of  the  true  owner.  They  were  not  holders  for  a  valuable  considera- 
tion, within  the  meaning  or  within  the  policy  of  the  law. 

In  Miller  v.  Eace,  1  Burr.  452,  a  bank-note  was  stolen,  and  came 
to  the  hands  of  the  plaintiff,  and  he  was  held  entitled  to  it.  But 
the  Court  of  King's  Bench  considered  bank-notes  as  cash,  which 
passed  as  money  in  the  way  of  business ;  and  the  holder,  in  that  case, 
came  by  the  note  for  a  full  and  valuable  consideration,  by  giving 
money  in  exchange  for  it,  in  the  usual  course  of  his  business,  and 
without  notice  of  the  robbery,  and  on  those  considerations  he  was 
entitled  to  the  amount  of  the  note.  So,  in  Grant  v.  Vaughan,  3  Burr. 
1516,  1  W.  Black.  785,  a  bill  of  exchange,  payable  to  bearer,  was 
lost,  and  the  finder  paid  it  to  a  grocer  for  teas,  and  took  the  change. 
There  the  court  laid  stress  on  the  facts  that  the  holder  came  by  the 
bill  bona  fide,  and  in  the  course  of  trade,  and  for  a  full  and  fair 
consideration,  and  that,  though  he  and  the  real  owner  were  equally 
innocent,  yet  he  was  to  be  preferred,  for  the  sake  of  commerce  and 
confidence  in  negotiable  paper.  Again,  in  Peacock  v.  Ehodes,  1  Doug. 
633,  a  bill  of  exchange,  with  a  blank  indorsement,  was  stolen  and 
negotiated  to  a  person  who  took  it  in  the  way  of  his  trade,  for  cloth 
sold  and  cash  for  the  balance,  and  he  was  held  entitled  to  hold  it. 
Lord  Mansfield  placed  reliance  on  the  circumstance  that  it  was  re- 
ceived in  the  course  of  trade.  It  was  "by  reason  of  the  course  of 
trade,  which  creates  a  property  in  the  assignee  or  bearer,"  that 
Holt,  C.  J.,  1  Salk.  126,  Anon.,  held,  that  the  owner  of  a  bank-bill. 


374  holder's  position. 

which  was  lost  and  transferred  by  the  finder  to  C.  for  a  valuable 
consideration,  could  not  maintain  an  action  against  C.  It  will  not 
be  necessary  to  go  further  in  support  of  the  principle  which  uni- 
formly pervades  the  cases  upon  this  point,  and  I  shall  conclude  with 
the  case  of  Collins  v.  Martin,  1  Bos.  &  Pul.  648,  in  which  it  was 
decided  that,  if  bills  of  exchange,  indorsed  in  blank,  be  deposited 
with  a  banker,  to  be  received  when  due,  and  the  banker  raises  money 
on  them  by  pledging  them  to  C,  and  then  becomes  bankrupt,  C. 
could  not  be  sued  by  the  real  owner,  as  he  took  them  innocently,  with- 
out knowledge  of  the  previous  circumstances.  But  it  is  to  be  ob- 
served that  C.  there  advanced  money  to  the  banker,  on  the  credit  of 
the  bills ;  and,  as  Eyre,  C.  J.,  observed  in  that  case :  "  If  it  can  be 
proved  that  the  holder  gave  no  value  for  the  bill,  then,  indeed,  he 
is  in  privity  with  the  first  holder,  and  affected  by  all  that  will  affect 
him." 

In  short,  I  have  not  been  able  to  discover  a  case  in  which  the 
holder  of  negotiable  paper,  fraudulently  transferred  to  him,  was 
deemed  to  have  as  good  a  title,  in  law  or  equity,  as  the  true  owner, 
unless  he  received  it  not  only  without  notice,  but  in  the  course  of 
business,  and  for  a  fair  and  valuable  consideration  given  or  allowed 
on  his  part,  on  the  strength  of  that  identical  paper.  It  is  the  credit 
given  to  the  paper,  and  the  consideration  bona  fide  paid  on  receiving 
it,  that  entitles  the  holder,  on  grounds  of  commercial  policy,  to  such 
extraordinary  protection,  even  in  cases  of  the  most  palpable  fraud. 
It  is  an  exception  to  the  general  rule  of  law,  and  ought  not  to  be 
carried  beyond  the  necessity  that  created  it. 

I  shall  accordingly  declare,  that  the  defendants,  J.  and  C.  Cod- 
dington,  are  not  entitled  to  the  notes  or  the  proceeds  thereof,  as 
against  the  plaintiff,  who  was  the  lawful  owner  of  them  when  they 
were  transferred  to  those  defendants,  inasmuch  as  they  did  not  re- 
ceive the  notes  in  the  course  of  business,  nor  in  payment,  in  whole  or 
in  part,  of  any  then  existing  debt,  nor  for  cash  or  property  advanced 
or  debt  created  or  responsibility  incurred  on  the  credit  of  the  notes. 
And  I  shall  direct  that  it  be  referred  to  a  master  to  compute  the 
amount  of  the  said  notes,  with  interest  thereon  from  the  times  they 
were  respectively  payable,  to  the  time  of  making  the  report ;  and  that 
all  the  defendants  in  the  amended  bill,  or  some  or  one  of  them,  pay 
to  the  plaintiff  the  sum  that  shall  be  reported  as  the  amount  of  the 
said  notes,  with  interest,  as  aforesaid,  within  thirty  days  after  the 
master  shall  have  made  and  filed  his  report,  and  notice  thereof,  and 
of  this  decree,  or  that  the  plaintiff  may  have  execution  therefor, 
against  all  or  either  of  the  said  defendants,  according  to  the  course 
and  practice  of  the  court. 

And  it  is  further  ordered,  that  the  defendants,  E.  and  S.,  pay  to 
the  plaintiff  his  entire  costs  of  this  suit,  to  be  taxed,  including  the 
costs  of  the  original  bill,  and  that  the  plaintiff  give  credit  upon  the 


SUTHERLAND   V.   MEAD.  375 

costs  SO  to  be  taxed,  the  charges  and  commissions  due  from  him  to 
the  said  defendants,  E.  and  S.,  upon  the  sale  of  the  vessel  in  the 
pleadings  mentioned,  and  amounting  to  $96.87;  and  that  he  have 
execution  for  the  balance  of  costs,  after  such  deduction,  against  them, 
the  said  K.  and  S.,  according  to  the  course  and  practice  of  the  court. 
And  it  is  further  ordered  that  no  costs  be  taxed  or  allowed  to  the 
plaintiff,  or  to  the  defendants,  J,  and  C.  C,  as  against  each  other. 

Decree  accordingly.^ 


SUTHERLAND    v.    MEAD. 

Supreme  Court  of  New  York,  Appellate  Division,  February,  1903.     80  App. 
Div.  103 ;  80  N.  Y.  Supp.  504. 

And  in  New  York,  it  has  been  held  that  snch  is  the  rule  under  the  Statute.* 

The  case  is  stated  in  the  opinion. 
[Argument  not  reported.] 

Hatch,  J.  This  action  was  brought  to  recover  upon  a  promissory 
note  made  by  the  defendant  Deshong,  upon  which  the  appellants 
were  accommodation  indorsers.  It  appeared  upon  the  hearing  of  the 
motion  that  the  defendant  Palleske  was  indebted  to  the  appellants 
upon  a  promissory  note  for  the  sum  of  $1000 ;  that  as  such  note  was 
about  falling  due  and  on  the  15th  of  April,  1903,  Palleske  requested 
the  appellants  to  accept  in  payment  of  such  note  the  promissory  note 
executed  by  Deshong,  set  forth  in  the  complaint  in  the  action;  that 
they  refused  so  to  accept  the  same  unless  Palleske  could  procure  it 
to  be  discounted  and  would  deliver  the  proceeds  thereof  to  the  appel- 
lants, and  for  such  purpose  the  appellants  indorsed  said  note  in  their 
firm  name,  and  the  defendant  Palleske  took  the  same  and  agreed  to 
return  the  proceeds  thereof  to  the  appellants.  Instead  of  discounting 
the  note  Palleske  transferred  the  same  to  the  plaintiff  in  the  action 
who  paid  thereon  the  sum  of  $150  cash,  and  as  further  consideration 
took  and  held  the  same  as  collateral  security  for  an  indebtedness  then 
due  and  owing  by  Palleske  to  the  plaintiff  in  a  sum  exceeding  $3000, 
the  whole  of  which  still  remains  due  and  unpaid. 

This  action  was  brought  by  the  plaintiff  to  enforce  the  note;  all 
of  the  defendants  made  default  in  answering.  Judgment  was  there- 
upon entered  by  the  plaintiff  for  the  full  amount  secured  to  be  paid 
by  the  note,  with  interest.  Thereafter  the  accommodation  indorsers, 
the  appellants  herein,  made  a  motion  to  open  the  default  and  for 
leave  to  serve  an  answer.  .  .  .  [Motion  to  open  default  considered, 

1  This  ease  was  affirmed  in  the  Court  of  Errors,  in  1822,  20  Johns.  637. 

2  N.  I.  L.  §  42. 


376  holder's  position. 

and  ruling  of  lower  court  denying  the  motion  held  correct.]  There- 
upon, without  obtaining  leave  so  to  do,  the  appellants  made  a  motion 
to  set  aside  the  judgment  or  in  the  alternative  to  modify  the  same  by 
reducing  the  recovery  upon  the  note  in  suit  to  the  sum  of  $150,  with 
interest  thereon  from  the  day  of  its  date.  This  motion  was  based 
upon  the  facts  and  circumstances  connected  with  the  delivery  of  the 
note  to  Palleske,  as  has  been  previously  stated,  and  also  upon  an 
affidavit  made  by  the  plaintiff  in  the  action  that  he  had  only  paid  to 
Palleske  for  the  note  $150  in  cash  and  held  the  same  as  collateral 
security  for  the  payment  of  a  pre-existing  debt.  It  was  made  to 
appear  by  the  moving  papers  that  the  appellants  herein  were  ignorant 
of  the  consideration  paid  by  the  plaintiff  for  the  note  prior  to  the 
time  when  the  application  was  made  to  open  the  default  when  the 
affidavit  was  read.  Upon  learning  these  facts  the  appellants  caused 
an  answer  to  be  prepared,  setting  up  the  facts  and  circumstances  con- 
nected with  the  delivery  of  the  note,  the  indorsement  by  the  appel- 
lants, the  fraudulent  diversion  of  the  same  by  Palleske,  and  the 
consideration  paid  therefor  by  the  plaintiff.  This  motion  upon  these 
papers  coming  on  to  be  heard  was  denied,  and  from  the  order  entered 
thereon  this  appeal  is  taken. 

The  present  facts  were  wholly  unknown  to  the  appellants  at  the 
time  when  the  motion  was  made.  .  .  .  The  present  motion  is  .  .  . 
to  set  aside  the  judgment  based  upon  a  state  of  facts,  showing  that 
the  plaintiff  was  only  entitled  to  enforce  the  payment  of  the  note  to 
the  extent  to  which  he  had  parted  with  value  therefor,  and  upon  the 
conceded  facts  he  was  not  entitled  to  the  judgment  which  had  been 
entered,  unless  entitled  to  enforce  the  note  for  the  full  amount.  .  .  . 

It  is  said,  however,  that  the  Negotiable  Instruments  Law  has 
changed  the  rule  in  respect  to  what  constitutes  consideration  for  a 
promissory  note,  it  being  claimed  that  a  pre-existing  indebtedness  is 
a  good  consideration  and  renders  the  holder  thereof  a  holder  for 
value  of  a  note  taken  as  security  therefor,  as  against  accommodation 
indorsers,  even  though  the  note  has  been  fraudulently  diverted  from 
the  purpose  for  which  it  was  given,  and  the  indorsers  have  received 
no  value.  Since  1832,  when  Coddington  v.  Bay,  20  Johns.  637,  was 
decided,  it  has  been  the  settled  law  of  this  State  that  accommodation 
makers  or  indorsers  of  negotiable  paper  were  not  liable  to  a  holder 
thereof  where  the  same  had  been  fraudulently  diverted  from  the 
purpose  for  which  it  was  made  or  the  indorsement  given  and  the 
holder  had  received  it  solely  as  collateral  security  for  an  antecedent 
debt.  Comstock  v.  Hier,  73  N.  Y.  269.  In  other  words,  the  surety 
has  the  right  to  impose  such  liability  upon  his  obligation  as  he  sees 
fi.t,  and  he  is  not  to  be  made  liable  outside  the  terms  of  his  engage- 
ment in  the  case  of  negotiable  paper  except  for  the  benefit  of  a  bona 
fide  holder  who  parted  with  value  and  was  misled  to  his  prejudice. 


SUTHERLAND   V.  MEAD.  377 

United  States  Nat.  Bank  v.  Ewing,  131  N".  Y.  506.  Whatever  may 
have  been  the  rule  with  respect  to  this  question  in  other  Jurisdictions, 
it  has  been  the  law  of  this  State,  uniformly  enforced  during  this 
period  of  time,  and  still  is  the  law  unless  the  Negotiable  Instruments 
Law  (Laws  of  1897,  chap.  612)  has  changed  the  same.  Section  51  ^ 
of  such  act  provides :  "  Value  is  any  consideration  sufficient  to  support 
a  simple  contract.  An  antecedent  or  pre-existing  debt  constitutes 
value;  and  is  deemed  such  whether  the  instrument  is  payable  on 
demand  or  at  a  future  time."  Standing  alone,  this  provision  has  not 
changed  the  existing  law.  It  was  always  the  law  of  this  State  that 
a  consideration  sufficient  to  support  a  simple  contract  constituted  a 
good  consideration  for  the  instrument.  This  declaration,  therefore, 
upon  this  subject  added  nothing  whatever  to  the  law  as  it  existed 
and  had  existed  from  time  immemorial.  So,  also,  an  antecedent  or 
pre-existing  debt  constituted  value  and  was  sufficient  in  consideration 
of  an  instrument,  either  negotiable  or  otherwise,  as  between  the 
parties  thereto.  Moreover,  it  was  always  the  law  that  the  actual  pay- 
ment and  discharge  of  a  pre-existing  debt  constituted  the  same  a 
valuable  consideration  for  the  transfer  of  commercial  paper  and  shut 
off  prior  equities  existing  against  it.  Such  was  the  rule  announced  in 
Coddington  v.  Bay,  supra,  and  has  since  been  enforced  by  the  courts 
of  this  State.  Mayer  v.  Heidelbach,  123  N.  Y.  332 ;  Spring  Brook 
Chemical  Co.  v.  Dunn,  39  App.  Div.  130;  Blair  v.  Hagemeyer,  26 
App.  Div.  219.  There  is  nothing  contained  in  this  enactment,  there- 
fore, which  has  changed  the  rule  of  law  respecting  the  consideration 
of  commercial  paper  as  it  had  previously  existed,  and  the  language 
of  the  statute  is  quite  insufficient  to  annul  the  rule  which  has  ob- 
tained with  respect  to  the  fraudulent  diversion  of  commercial  paper 
as  against  accommodation  indorsers  thereon.  Such  rule,  therefore, 
cannot  be  considered  as  changed  unless  it  be  by  virtue  of  the  other 
provisions  of  the  statute  showing  that  such  defence  is  cut  off  and 
indicating  a  clear  intent  to  change  the  rule. 

Section  52  ^  of  the  Negotiable  Instruments  Law  defines  what  con- 
stitutes a  holder  for  value :  "  Where  value  has  at  any  time  been  given 
for  the  instrument,  the  holder  is  deemed  a  holder  for  value  in  respect 
to  all  parties  who  became  such  prior  to  that  time."  And  by  section 
55^  (as  amd.  by  Laws  of  1898,  chap.  336)  an  accommodation  party 
is  made  liable  on  the  instrument  to  a  holder  for  value,  although  such 
holder  at  the  time  of  taking  the  instrument  knew  him  to  be  only  an 
accommodation  party.  Section  91  *  defines  a  holder  in  due  course 
to  be  a  person  who  has  taken  the  instrument  under  the  following 
conditions:  "1.  That  it  is  complete  and  regular  upon  its  face; 
2.  That  he  became  the  holder  of  it  before  it  was  overdue,  and  without 
notice  that  it  had  been  previously  dishonored,  if  such  was  the  fact; 

1  N.  I.  L.  §  42.  2  Id.  §  43. 

»  Id.  §  46.  *  Id.  §  69. 


378  holder's  position. 

3.  That  he  took  it  in  good  faith  and  for  value;  4.  That  at  the  time 
it  was  negotiated  to  him  he  had  no  notice  of  any  infirmity  in  the 
instrument  or  defect  in  the  title  of  the  person  negotiating  it."  Sec- 
tion 94  ^  defines  when  the  title  is  defective  in  the  person  who  has 
negotiated  the  instrument,  as  follows :  "  'Wlien  he  obtained  the  in- 
strument, or  any  signature  thereto,  by  fraud,  duress,  or  force  and 
fear,  or  other  unlawful  means,  or  for  an  illegal  consideration,  or  when 
he  negotiates  it  in  breach  of  faith,  or  under  such  circimistances  as 
amount  to  a  fraud."  Section  95  ^  provides  that  the  holder  must  have 
"  actual  knowledge  of  the  infirmity  or  defect  or  knowledge  of  such 
facts  that  his  action  in  taking  the  instrument  amounted  to  bad 
faith."  By  section  96  ^  the  rights  of  a  holder  in  due  course  are 
defined  to  be :  "  A  holder  in  due  course  holds  the  instrument  free 
from  any  defect  of  title  of  prior  parties,  and  free  from  defences  avail- 
able to  prior  parties  among  themselves,  and  may  enforce  payment  of 
the  instrument  for  the  full  amount  thereof  against  all  parties  liable 
thereon."  By  section  98  *  it  is  provided :  "  Every  holder  is  deemed 
prima  facie  to  be  a  holder  in  due  course ;  but  when  it  is  shown  that 
the  title  of  any  person  who  has  negotiated  the  instrument  was  defec- 
tive, the  burden  is  on  the  holder  to  prove  that  he  or  some  person 
under  whom  he  claims  acquired  the  title  as  a  holder  in  due  course." 

It  is  evident  from  these  provisions  that  the  Legislature  did  not 
intend  to  wnpe  out  the  defences  to  a  promissory  note  where  the  same 
had  been  procured  from  the  maker  by  fraud,  or  where  the  indorse- 
ment had  been  given  for  a  specific  purpose,  and  a  fraudulent  diver- 
sion of  the  paper  had  been  had.  If  the  holder  took  the  same  with 
notice  of  such  facts  or  circumstances  as  charged  him  with  notice,  or 
if  he  parted  with  no  value,  it  constitutes  a  good  defence  to  such  note. 
As  the  definition  of  value  for  a  promissory  note  has  not  added  any- 
thing to  the  law  upon  that  subject  beyond  such  as  was  previously 
recognized,  we  ought  not  to  conclude  that  the  Legislature  intended 
to  change  the  rule  with  respect  thereto,  nor  to  permit  frauds  to  be 
perpetrated  thereunder.  When  the  Legislature  defines  a  defective 
title  it  states  in  express  terms  that  a  fraudulent  diversion  is  such. 
All  of  these  sections  can  be  harmonized  in  their  entirety  without  any 
subtle  refinement  of  reasoning  by  construing  section  51^  to  mean  that 
to  constitute  an  antecedent  or  pre-existing  debt  a  valuable  considera- 
tion in  support  of  a  promissory  note,  that  had  been  fraudulently 
diverted,  as  valid  in  the  hands  of  a  hona  fide  holder,  the  latter  must 
have  cancelled,  and  in  legal  effect  paid  and  discharged,  the  antecedent 
or  pre-existing  debt.  By  still  holding  the  debt  he  in  fact  parts  with 
no  value.  It  was  not  intended  thereby  that,  where  a  debt  continued 
to  remain  in  existence  and  enforceable  as  such,  and  the  note  is  taken 
as  collateral  security  for  its  pa}'ment,  such  debt  undischarged  consti- 

1  N.  I.  L.  §  72.  9  Id.  §  73.  »  Id.  §  74. 

*  Id.  §  76.  ,6  Id.  I  42. 


SUTHERLAND   V.  MEAD.  379 

tutes  a  valuable  consideration,  or  the  holder  of  the  note  one  in  due 
course  as  against  the  accommodation  maker  or  indorser,  who  has  been 
defrauded  by  the  negotiation  of  the  instrument.  We  are  not  to 
impute  to  the  Legislature  an  intent  to  change  a  rule  of  law  which  has 
existed  in  uniform  course  of  enforcement  for  over  three-quarters  of 
a  century  without  a  clear  and  unequivocal  expression  so  to  do.  The 
rules  of  law  which  have  been  laid  down  in  England  covering  such 
question,  or  the  reasons  assigned  for  a  different  rule  in  other  juris- 
dictions in  this  country,  do  not  furnish  controlling  reasons  for  chang- 
ing the  law  of  this  State  so  as  to  bring  it  into  harmony  with  such 
views,  in  face  of  the  fact  that  in  the  commercial  centre  of  this  country 
these  rules  have  been  applied  for  this  length  of  time  without  damage 
to  business  interests  or  harm  to  commercial  usages,  and  during  its 
operation  a  period  of  commercial  activity  and  prosperity  has  existed 
heretofore  unknovtTi  in  the  world's  history.  We  may  take  judicial 
notice  that  the  commission  appointed  to  revise  and  codify  the  statutes 
was  created  in  the  main  to  codify  existing  laws  and  not  make  new 
rules ;  ^  and  certainly  it  was  never  intended  that  settled  usages  in  re-- 
spect  of  commercial  paper,  founded  upon  decisions  covering  a  period 
of  eighty  years  and  uniform  in  application,  should  be  overthrown  in 
the  construction  of  ambiguous  and  obscure  expressions  used  by  such 
a  body.  The  harmony  of  these  provisions  of  the  statute  is  in  no 
measure  disturbed  by  a  construction  which  causes  them  to  read  that 
an  antecedent  and  pre-existing  debt  must  be  paid  and  discharged  in 
order  to  constitute  the  holder  of  commercial  paper,  which  has  been 
fraudulently  diverted,  a  bona  fide  holder,  and,  as  such,  capable  of 
enforcing  the  same  as  against  the  accommodation  maker  or  indorser. 
Merely  taking  such  paper  as  collateral  security  for  the  payment  of  a 
pre-existing  or  antecedent  debt  does  not  constitute  such  debt  value 
within  the  meaning  of  this  statute.  This  matter  does  not  seem  to 
have  been  the  subject  of  discussion  beyond  that  had  at  Special  Term 
in  the  case  of  Brewster  v.  Shrader,  26  Misc.  Eep.  480,  where  a  differ- 
ent rule  was  laid  down.  The  authority  cited  therefor  in  the  opinion 
is  contained  in  the  reviser's  note  by  the  author  of  the  law.  See  Crawf. 
Neg.  Inst.  Law,  30,  in  which  it  is  stated  that  section  51^  was  designed 
to  change  the  rule  in  Coddington  v.  Bay,  supra,  and  the  opinion  of 
the  late  James  W.  Eaton,  Esq.,  instructor  upon  the  law  of  Bills  and 
Notes  in  the  Albany  Law  School,  wherein  he  says  in  his  published 
edition  of  the  Negotiable  Instruments  Law,  Eaton  &  Greene,  Neg. 
Inst.  Law,  43,  in  referring  to  section  51 :  "  It  is  to  be  inferred  that 
the  above  statute  extends  the  New  York  rule  to  include  instruments 
given  merely  as  collateral  security."  We  are  not  disposed  to  adopt 
this  construction  of  the  law.    Settled  principles  ought  not  to  be  over- 

1  Cf.  language  of  Lord  Herschell  in  Bank  of  England  v.  Vagliano  Brothers,  1891, 
A.  C.  145,  as  to  the  construction  of  the  Bills  of  Exchange  Act. 
«  N.  I.  L.  §  42. 


380  holder's  position. 

turned  by  imputing  a  legislative  intent  where  the  language  upon 
which  it  is  based  is  equivocal  in  expression  and  when  the  language 
used  which  it  is  claimed  changes  the  rule  may  be  naturally  harmo- 
nized with  the  decisions  of  the  courts  which  have  settled  the  law 
plainly  and  conclusively,  and  with  respect  to  which  commercial  deal- 
ings have  been  governed  in  this  State  for  over  eighty  years.  But 
even  though  we  should  be  wrong  in  our  construction  of  this  statute, 
nevertheless  it  does  not  change  the  rule  of  law  to  be  applied  in  the 
particular  case.  As  we  have  seen,  by  section  98,^  above  quoted,  the 
burden  is  placed  upon  the  holder  of  every  promissory  note  fraudu- 
lently diverted  to  show  that  he,  or  some  person  under  whom  he 
claims,  acquired  title  thereto  as  a  holder  in  due  course.  Nothing 
which  appears  in  these  papers  tends  to  controvert  the  fact  that  the 
note  in  question  was  fraudulently  diverted.  The  proof  upon  such 
subject,  submitted  in  the  moving  papers,  is  clear  and  unequivocal. 
The  answer  sets  it  up  as  a  defence.  Before  the  plaintiff,  therefore, 
could  recover,  he  must  show  that  he  or  some  person  under  whom  he 
claims  acquired  the  paper  in  due  course  and  without  knowledge  of 
any  infirmity  attending  upon  it.  Under  the  pleadings  an  issue  of 
fact  upon  this  question  may  be  presented  and  these  appellants  are 
not  to  be  made  to  suffer  through  the  fraud  that  has  been  perpetrated 
upon  them  if  the  plaintiff  had  notice  of  such  fact,  and  the  appellants 
ought  to  have  an  opportunity  to  be  heard  upon  this  subject. 

The  doctrine  of  estoppel  based  upon  the  certificate  executed  by  the 
appellants  and  delivered  to  the  plaintiff  that  the  note  was  a  genuine 
business  note  given  for  value  received;  that  there  Avas  no  defence  to 
the  same,  either  in  law  or  in  equity,  does  not  estop  the  appellants 
from  interposing  the  defence  of  fraudulent  diversion.  The  certificate 
was  in  harmony  with  the  facts.  It  was  genuine  business  paper  exe- 
cuted for  a  particular  purpose,  and  in  the  hands  of  a  holder  in  due 
course  may  be  enforced.  In  order  to  constitute  an  estoppel  in  pais, 
it  must  appear  that  the  act  which  concludes  the  party  was  expressly 
designed  to  influence  the  conduct  of  another,  and  did  so  influence 
him,  and  when  a  denial  of  the  act  will  operate  to  the  injury  of  the 
holder.  Payne  v.  Burnham,  62  N.  Y.  69.  Such  is  the  doctrine  of  the 
cases  cited  by  the  respondent.  They  are  without  application  in 
the  present  case  for  the  reason  that  the  certificate  can  add  nothing  to 
the  rights  of  the  present  holder  of  the  note.  If  the  note  had  been 
delivered  to  him  without  consideration  he  could  not  have  enforced  it 
against  these  accommodation  indorsers,  as  he  would  not  have  been 
misled  or  injured  by  the  certificate  which  was  given.  To  the  extent 
that  he  parted  with  value  he  is  entitled  to  enforce  the  note,  with  or 
without  the  certificate.  In  holding  it  as  collateral  security  for  the 
payment  of  his  pre-existing  debt  the  certificate  in  nowise  prejudices 

1  N.  I.  L.  §  76. 


SWIFT  V.   TYSON.  381 

him  as  he  has  suffered  nothing  thereby  and  parted  with  no  value  on 
account  thereof. 

If  these  views  be  correct,  it  follows  that  the  order  should  be  re- 
versed, and  the  judgment  set  aside  upon  payment  of  costs  and  dis- 
bursements of  the  action  and  $10  costs  of  the  motion  to  the 
respondent,  and  defendants  allowed  to  answer.  As  the  defendants, 
appellants,  however,  admit  liability  to  the  extent  of  $150  interest 
and  costs,  the  plaintiff  in  the  action  may,  if  he  so  elects,  stipulate  to 
reduce  the  judgment  to  such  amount,  in  which  event  the  judgment 
to  that  extent  should  be  permitted  to  stand  and  be  enforced.  Ten 
dollars  costs  and  disbursements  of  this  appeal  to  the  appellants. 

Van  Brunt,  P.  J.,  O'Brien,  Ingraham,  and  McLaughlin,  JJ., 
concurred. 

Order  reversed,  with  ten  dollars  costs  and  disbursements. 


SWIFT    V.    TYSON". 

Supreme  Court  of  the  United  States,  January,  1842.     16  Peters,  1. 

In  other  jurisdictions,  no  such  exception  is  recognized,  and  a  pre-existing  debt  is 
deemed  value,  whether  the  instrument  be  transferred  in  payment  of,  or  as  security  for 
such  debt. 

The  case  is  stated  in  the  opinion  of  the  court. 
[Argument  not  reported.] 

Story,  J.  This  cause  comes  before  us  from  the  Circuit  Court  of 
the  Southern  District  of  New  York,  upon  a  certificate  of  division  of 
the  judges  of  that  court. 

The  action  was  brought  by  the  plaintiff,  Swift,  as  indorsee,  against 
the  defendant,  Tyson,  as  acceptor,  upon  a  bill  of  exchange,  dated  at 
Portland,  Maine,  on  the  first  day  of  May,  1836,  for  the  sum  of 
$1540.30,  payable  six  months  after  date  and  grace,  drawn  by  one 
Nathaniel  Norton  and  one  Jairus  S.  Keith  upon  and  accepted  by 
Tyson,  at  the  city  of  New  York,  in  favor  of  the  ordef  of  Nathaniel 
Norton,  and  by  Norton  indorsed  to  the  plaintiff.  The  bill  was  dis- 
honored at  maturity. 

At  the  trial,  the  acceptance  and  indorsement  of  the  bill  were  ad- 
mitted, and  the  plaintiff  there  rested  his  case.  The  defendant  then 
introduced  in  evidence  the  answer  of  Swift  to  a  bill  of  discovery,  by 
which  it  appeared  that  Swift  took  the  bill  before  it  became  due,  in 
pa}Tnent  of  a  promissory  note,  due  to  him  by  Norton  and  Keith ;  that 
he  understood  that  the  bill  was  accepted  in  part  pajonent  of  some 
lands  sold  by  Norton  to  a  company  in  New  York ;   that  Swift  was  a 


382  holder's  position. 

hona  fide  holder  of  the  bill,  not  having  any  notice  of  anything  in  the 
sale  or  title  to  the  lands,  or  otherwise,  impeaching  the  transaction, 
and  with  the  full  belief  that  the  bill  was  justly  due.  The  particular 
circumstances  are  fully  set  forth  in  the  answer  in  the  record ;  but  it 
does  not  seem  necessary  further  to  state  them.  The  defendant  then 
offered  to  prove  that  the  bill  was  accepted  by  the  defendant  as  part 
consideration  for  the  purchase  of  certain  lands  in  the  State  of  Maine, 
which  Norton  and  Keith  represented  themselves  to  be  the  owners  of, 
and  also  represented  to  be  of  great  value,  and  contracted  to  convey  a 
good  title  thereto;  and  that  the  representations  were  in  every  respect 
fraudulent  and  false,  and  Norton  and  Keith  had  no  title  to  the  lands, 
and  that  the  same  were  of  little  or  no  value.  The  plaintiff  objected  to 
the  admission  of  such  testimony,  or  of  any  testimony,  as  against  him, 
impeaching  or  showing  a  failure  of  the  consideration  on  which  the  bill 
was  accepted,  under  the  facts  admitted  by  the  defendant,  and  those 
proved  by  him,  by  reading  the  answer  of  the  plaintiff  to  the  bill  of 
discovery.  The  judges  of  the  Circuit  Court  thereupon  divided  in 
opinion  upon  the  following  point  or  question  of  law :  Whether,  under 
the  facts  last  mentioned,  the  defendant  was  entitled  to  the  same  de- 
fence to  the  action  as  if  the  suit  was  between  the  original  parties  to 
the  bill,  that  is  to  say,  Norton,  or  Norton  and  Keith,  and  the  defend- 
ant; and  whether  the  evidence  so  offered  was  admissible  as  against 
the  plaintiff  in  the  action.  And  this  is  the  question  certified  to  us  for 
our  decision. 

There  is  no  doubt  that  a  hona  fide  holder  of  a  negotiable  instru- 
ment for  a  valuable  consideration,  without  any  notice  of  facts  which 
impeach  its  validity  as  between  the  antecedent  parties,  if  he  takes 
it  under  an  indorsement  made  before  the  same  becomes  due,  holds  the 
title  unaffected  by  these  facts,  and  may  recover  thereon,  although,  as 
between  the  antecedent  parties,  the  transaction  may  be  without  any 
legal  validity.  This  is  a  doctrine  so  long  and  so  well  established,  and 
so  essential  to  the  security  of  negotiable  paper,  that  it  is  laid  up 
among  the  fundamentals  of  the  law,  and  requires  no  authority  or 
reasoning  to  be  now  brought  in  its  support.  As  little  doubt  is  there 
that  the  holder  of  any  negotiable  paper,  before  it  is  due,  is  not  bound 
to  prove  that  he  is  a  hona  fide  holder  for  a  valuable  consideration, 
without  notice;  for  the  law  will  presume  that  in  the  absence  of  all 
rebutting  proofs,  and  therefore  it  is  incumbent  upon  the  defendant  to 
establish  by  way  of  defence  satisfactory  proofs  of  the  contrary,  and 
thus  to  overcome  the  prima  facie  title  to  the  plaintiff. 

In  the  present  case,  the  plaintiff  is  a  hona  fide  holder,  without 
notice,  for  what  the  law  deems  a  good  and  valid  consideration,  that  is, 
for  a  pre-existing  debt;  and  the  only  real  question  in  the  cause  is, 
whether,  under  the  circumstances  of  the  present  case,  such  a  pre- 
existing debt  constitutes  a  valuable  consideration  in  the  sense  of  the 
general  rule  applicable  to  negotiable  instruments.     We  say  under 


SWIFT  V.  TYSON.  383 

the  circumstances  of  the  present  case,  for  the  acceptance  having  been 
made  in  New  York,  the  argument  on  behalf  of  the  defendant  is,  that 
the  contract  is  to  be  treated  as  a  New  York  contract,  and  therefore 
to  be  governed  by  the  laws  of  New  York,  as  expounded  by  its  courts, 
as  well  upon  gefleral  principles  as  by  the  express  provisions  of  the 
34th  section  of  the  Judiciary  Act  of  1789,  c.  20.  And  then  it  is 
further  contended  that,  by  the  law  of  New  York,  as  thus  expounded 
by  its  courts,  a  pre-existing  debt  does  not  constitute,  in  the  sense  of 
the  general  rule,  a  valuable  consideration  applicable  to  negotiable 
instruments. 

In  the  first  place,  then,  let  us  examine  into  the  decisions  of  the 
courts  of  New  York  upon  this  subject.  In  the  earliest  case,  Warren 
V.  Lynch,  5  Johns.  239,  the  Supreme  Court  of  New  York  appear  to 
have  held  that  a  pre-existing  debt  was  a  sufficient  consideration  to 
entitle  a  ho7ia  fide  holder  without  notice  to  recover  the  amount  of  a 
note  indorsed  to  him,  which  might  not,  as  between  the  original 
parties,  be  valid.  The  same  doctrine  was  affinned  by  Mr.  Chancellor 
Kent,  in  Bay  v.  Coddington,  5  Johns.  Ch.  54.^  Upon  that  occasion, 
he  said  that  negotiable  paper  can  be  assigned  or  transferred  by  an 
agent  or  factor,  or  by  any  other  person,  fraudulent!}',  so  as  to  bind 
the  true  owner  as  against  the  holder,  provided  it  be  taken  in  the 
usual  course  of  trade,  and  for  a  fair  and  valuable  consideration, 
without  notice  of  the  fraud.  But  he  added  that  the  holders  in  that 
case  were  not  entitled  to  the  benefit  of  the  rule,  because  it  was  not 
negotiated  to  them  in  the  usual  course  of  business  or  trade,  nor  in 
payment  of  any  antecedent  and  existing  debt,  nor  for  cash,  or  prop- 
erty advanced,  debt  created,  or  responsibility  incurred,  on  the 
strength  and  credit  of  the  notes,  thus  directly  affirming  that  a  pre- 
existing debt  was  a  fair  and  valuable  consideration  within  the  pro- 
tection of  the  general  rule.  And  he  has  since  affirmed  the  same 
doctrine,  upon  a  full  review  of  it,  in  his  Commentaries.  3  Kent, 
Com.  §  44,  p.  81.  The  decision  in  the  case  of  Bay  v.  Coddington  was 
afterwards  affirmed  in  the  Court  of  Errors,  20  Johns.  637,  and  the 
general  reasoning  of  the  Chancellor  was  fully  sustained.  There  were, 
indeed,  peculiar  circumstances  in  that  case,  which  the  court  seem  to 
have  considered  as  entitling  it  to  be  treated  as  an  exception  to  the 
general  rule,  upon  the  ground,  either  because  the  receipt  of  the  notes 
was  under  suspicious  circumstances,  the  transfer  having  been  made 
after  the  known  insolvency  of  the  indorser,  or  because  the  holder  had 
received  it  as  a  mere  security  for  contingent  responsibilities,  with 
which  the  holders  had  not  then  become  charged.  There  was,  how- 
ever, a  considerable  diversity  of  opinion  among  the  members  of  the 
court  upon  that  occasion,  several  of  them  holding  that  the  decree 
ought  to  be  reversed,  others  affirming  that  a  pre-existing  debt  was  a 
valuable  consideration,  sufficient  to  protect  the  holders,  and  others 

1  Ante,  p.  372. 


384  holder's  position. 

again  insisting  that  a  pre-existent  debt  was  not  sufficient.  From  that 
period,  however,  for  a  series  of  years,  it  seems  to  have  been  held,  by 
the  Supreme  Court  of  the  State,  that  a  pre-existing  debt  was  not  a 
sufficient  consideration  to  shut  out  the  equities  of  the  original 
parties,  in  favor  of  the  holders.  But  no  case  to  that  effect  has  ever 
been  decided  in  the  Court  of  Errors.  The  cases  cited  at  the  bar,  and 
especially  Rosa  v.  Brotherson,  10  Wend.  85,  The  Ontario  Bank  v. 
Worthington,  13  Wend.  593,  and  Payne  v.  Cutler,  13  Wend.  605,  are 
directly  in  point.  But  the  more  recent  cases.  The  Bank  of  Salina  v. 
Babcock,  21  Wend.  499,  and  The  Bank  of  Sandusky  v.  Scoville,  24 
Wend.  115,  have  greatly  shaken,  if  they  have  not  entirely  overthrown, 
those  decisions,  and  seem  to  have  brought  back  the  doctrine  to  that 
promulgated  in  the  earliest  cases.  So  that,  to  say  the  least  of  it,  it 
admits  of  serious  doubt,  whether  any  doctrine  upon  this  question 
can  at  the  present  time  be  treated  as  finally  established;  and  it  is 
certain  that  the  Court  of  Errors  have  not  pronounced  any  positive 
opinion  upon  it.^ 

But,  admitting  the  doctrine  to  be  fully  settled  in  New  York,  it 
remains  to  be  considered  whether  it  is  obligatory  upon  this  court,  if 
it  differs  from  the  principles  established  in  the  general  commercial 
law.  It  is  observable  that  the  courts  of  New  York  do  not  found  their 
decisions  upon  this  point  upon  any  local  statute,  or  positive,  fixed, 
or  ancient  local  usage ;  but  they  deduce  the  doctrine  from  the  general 
principles  of  commercial  law.  It  is,  however,  contended  that  the 
34th  section  of  the  Judiciary  Act  of  1789,  c.  20,  furnishes  a  rule 
obligatory  upon  this  court  to  follow  the  decisions  of  the  State  tri- 
bunals in  all  cases  to  which  they  apply.  That  section  provides  "  that 
the  laws  of  the  several  States,  except  where  the  Constitution,  treaties, 
or  statutes  of  the  United  States  shall  otherwise  require  or  provide, 
shall  be  regarded  as  rules  of  decision  in  trials  at  common  law  in  the 
courts  of  the  United  States,  in  cases  where  they  apply."  In  order  to 
maintain  the  argument,  it  is  essential,  therefore,  to  hold  that  the  word 
"  laws,"  in  this  section,  includes  within  the  scope  of  its  meaning  the 
decisions  of  the  local  tribunals.  In  the  ordinary  use  of  language,  it 
will  hardly  be  contended  that  the  decisions  of  courts  constitute  laws. 
They  are,  at  most,  only  evidence  of  what  the  laws  are,  and  are  not  of 
themselves  laws.  They  are  often  re-examined,  reversed,  and  qualified 
by  the  courts  themselves,  whenever  they  are  found  to  be  either  de- 
fective, or  ill-founded,  or  otherwise  incorrect.  The  laws  of  a  State 
are  more  usually  understood  to  mean  the  rules  and  enactments  pro- 
mulgated by  the  legislative  authority  thereof,  or  long-established 
local  customs  having  the  force  of  laws.     In  all  the  various  cases, 

^  But  see  Bigelow,  Bills  and  Notes,  244.  The  principle  of  Bay  v.  Coddinfrton  waa 
affirmed  in  the  case  of  Stalker  v.  M'Donald,  6  Hill,  93,  1843,  in  which  the  New  York 
court  declined  to  follow  the  rule  of  Swift  v.  Tyson ;  and  6ee  Sutherland  v.  Mead,  ante, 
p.  375. 


SWIFT  V.   TYSON.  385 

which  have  hitherto  come  before  us  for  decision,  this  court  have  uni- 
formly supposed  that  the  true  interpretation  of  the  34th  section 
limited  its  application  to  State  laws  strictly  local,  that  is  to  say,  to 
the  positive  statutes  of  the  State,  and  the  construction  thereof  adopted 
by  the  local  tribunals,  and  to  rights  and  titles  to  things  having  a  per- 
manent locality,  such  as  the  rights  and  titles  to  real  estate,  and  other 
matters  immovable  and  intraterritorial  in  their  nature  and  charac- 
ter. It  never  has  been  supposed  by  us  that  the  section  did  apply,  or 
was  designed  to  apply,  to  questions  of  a  more  general  nature,  not  at 
all  dependent  upon  local  statutes  or  local  usages  of  a  fixed  and  per- 
manent operation;  as,  for  example,  to  the  construction  of  ordinary 
contracts  or  other  written  instruments,  and  especially  to  questions  of 
general  commercial  law,  where  the  State  tribunals  are  called  upon 
to  perform  the  like  functions  as  ourselves,  that  is,  to  ascertain,  upon 
general  reasoning  and  legal  analogies,  what  is  the  true  exposition  of 
the  contract  or  instrument,  or  what  is  the  just  rule  furnished  by  the 
principles  of  commercial  law  to  govern  the  case.  And  we  have  not 
now  the  slightest  difficulty  in  holding  that  this  section,  upon  its  true 
intendment  and  construction,  is  strictly  limited  to  local  statutes  and 
local  usages  of  the  character  before  stated,  and  does  not  extend  to 
contracts  and  other  instruments  of  a  commercial  nature,  the  true 
interpretation  and  effect  whereof  are  to  be  sought,  not  in  the  deci- 
sions of  the  local  tribunals,  but  in  the  general  principles  and  doctrines 
of  commercial  jurisprudence.  Undoubtedly,  the  decisions  of  the 
local  tribunals  upon  such  subjects  are  entitled  to,  and  will  receive, 
the  most  deliberate  attention  and  respect  of  this  court;  but  they 
cannot  furnish  positive  rules,  or  conclusive  authority,  by  which  our 
own  judgments  are  to  be  bound  up  and  governed.  The  law  respecting 
negotiable  instruments  may  be  truly  declared,  in  the  language  of 
Cicero,  adopted  by  Lord  Mansfield  in  Luke  v.  Lyde,  2  Burr.  882,  887, 
to  be  in  a  great  measure,  not  the  law  of  a  single  country  only,  but  of 
the  commercial  world.  "  Non  erit  alia  lex  RomcB,  alia  Athenis,  alia 
nunc,  alia  posthac,  scd  et  apud  omnes  gentes,  et  omni  tempore,  una 
eademque  lex  ohtinehit." 

It  becomes  necessary  for  us,  therefore,  upon  the  present  occasion, 
to  express  our  own  opinion  of  the  true  result  of  the  commercial  law 
upon  the  question  now  before  us.  And  we  have  no  hesitation  in  say- 
ing that  a  pre-existing  debt  does  constitute  a  valuable  consideration, 
in  the  sense  of  the  general  rule  already  stated,  as  applicable  to  negoti- 
able instruments.  Assuming  it  to  be  true  (which,  however,  may  well 
admit  of  some  doubt  from  the  generality  of  the  language),  that  the 
holder  of  a  negotiable  instrument  is  unaffected  with  the  equities  be- 
tween the  antecedent  parties,  of  which  he  has  no  notice,  only  where 
he  receives  it  in  the  usual  course  of  trade  and  business  for  a  valuable 
consideration,  before  it  becomes  due;  we  are  prepared  to  say  that 
receiving  it  in  payment  of,  or  as  security  for  a  pre-existing  debt,  is 

25 


386  holder's  position. 

according  to  the  known  usual  course  of  trade  and  business.  And  why, 
upon  principle,  should  not  a  pre-existing  debt  be  deemed  such  a 
valuable  consideration?  It  is  for  the  benefit  and  convenience  of  the 
commercial  world  to  give  as  wide  an  extent  as  practicable  to  the 
credit  and  circulation  of  negotiable  paper,  that  it  may  pass  not  only 
as  security  for  new  purchases  and  advances  made  upon  the  transfer 
thereof,  but  also  in  payment  of  and  as  security  for  pre-existing  debts. 
The  creditor  is  thereby  enabled  to  realize  or  to  secure  his  debt,  and 
thus  may  safely  give  a  prolonged  credit,  or  forbear  from  taking  any 
legal  steps  to  enforce  his  rights.  The  debtor  also  has  the  advantage 
of  making  his  negotiable  securities  of  equivalent  value  to  cash.  But 
establish  the  opposite  conclusion,  that  negotiable  paper  cannot  be 
applied  in  payment  of,  or  as  security  for,  pre-existing  debts,  without 
letting  in  all  the  equities  between  the  original  and  antecedent  parties, 
and  the  value  and  circulation  of  such  securities  must  be  essentially 
diminished,  and  the  debtor  driven  to  the  embarrassment  of  making 
a  sale  thereof,  often  at  a  ruinous  discount,  to  some  third  person,  and 
then  by  circuity  to  apply  the  proceeds  to  the  payment  of  his  debts. 
What,  indeed,  upon  such  a  doctrine,  would  become  of  that  large  class 
of  cases,  where  new  notes  are  given  by  the  same  or  by  other  parties, 
by  way  of  renewal  or  security  to  banks,  in  lieu  of  old  securities 
discounted  by  them,  which  have  arrived  at  maturity?  Probably 
more  than  one-half  of  all  bank  transactions  in  our  country,  as  well 
as  those  of  other  countries,  are  of  this  nature.  The  doctrine  would 
strike  a  fatal  blow  at  all  discounts  of  negotiable  securities  for  pre- 
existing debts. 

This  question  has  been  several  times  before  this  court,  and  it  has 
been  uniformly  held  that  it  makes  no  difference  whatsoever  as  to 
the  rights  of  the  holder,  whether  the  debt  for  which  the  negotiable 
instrument  is  transferred  to  him  is  a  pre-existing  debt,  or  is  con- 
tracted at  the  time  of  the  transfer.  In  each  case,  he  equally  gives 
credit  to  the  instrument.  The  cases  of  Coolidge  v.  Payson,  2  Wheat. 
66,  70,  73,  and  Townsley  v.  Sumrall,  2  Pet.  170,  182,  are  directly 
in  point. 

In  England,  the  same  doctrine  has  been  uniformly  acted  upon. 
As  long  ago  as  the  case  of  Pillans  and  Eose  v.  Van  Mierop  and 
Hopkins,  3  Burr.  1663,  the  very  point  was  made,  and  the  objection 
was  overruled.  That,  indeed,  was  a  case  of  far  more  stringency 
than  the  one  now  before  us ;  for  the  bill  of  exchange,  there  drawn  in 
discharge  of  a  pre-existing  debt,  was  held  to  bind  the  party  as  ac- 
ceptor, upon  a  mere  promise  made  by  him  to  accept  before  the  bill 
was  actually  drawn.  Upon  that  occasion.  Lord  Mansfield,  likening 
the  case  to  that  of  a  letter  of  credit,  said  that  a  letter  of  credit  may 
be  given  for  money  already  advanced,  as  well  as  for  money  to  be 
advanced  in  future ;  and  the  whole  court  held  the  plaintiff  entitled 
to  recover.    From  that  period  downward,  there  is  not  a  single  case 


SWIFT  V.   TYSON.  387 

to  be  found  in  England,  in  which  it  has  ever  been  held  by  the  court, 
that  a  pre-existing  debt  was  not  a  valuable  consideration,  sufficient 
to  protect  the  holder,  within  the  meaning  of  the  general  rule,  al- 
though incidental  dicta  have  been  sometimes  relied  on  to  establish  the 
contrary,  such  as  the  dictum  of  Lord  Chief  Justice  Abbott  in  Smith 
V.  De  Witts,  6  Dowl.  &  Eyl.  120,  and  De  la  Chaumette  v.  The  Bank 
of  England,  9  Barn.  &  Cress.  208,  where,  however,  the  decision  turned 
upon  very  different  considerations. 

Mr.  Justice  Bayley,  in  his  valuable  work  on  Bills  of  Exchange 
and  Promissory  Notes,  lays  down  the  rule  in  the  most  general  terms, 
.  .  .  Bayley,  Bills,  pp.  499,  500,  5th  London  edition,  1830.  It  is  ob- 
servable that  he  here  uses  the  words  "  valid  consideration,"  obviously 
intending  to  make  the  distinction,  that  it  is  not  intended  to  apply 
solely  to  cases  where  a  present  consideration  for  advances  of  money 
on  goods  or  otherwise  takes  place  at  the  time  of  the  transfer  and 
upon  the  credit  thereof.  And  in  this  he  is  fully  borne  out  by  the 
authorities.  They  go  further,  and  establish  that  a  transfer  as  security 
for  past  and  even  for  future  responsibilities,  will,  for  this  purpose, 
be  a  sufficient,  valid,  and  valuable  consideration.  Thus,  in  the  case  of 
Bosanquet  v.  Dudman,  1  Stark.  1,  it  was  held  by  Lord  Ellenborough, 
that  if  a  banker  be  under  acceptances  to  an  amount  beyond  the  cash 
balance  in  his  hands,  every  bill  he  holds  of  that  customer's  hona  fide, 
he  is  to  be  considered  as  holding  for  value;  and  it  makes  no  differ- 
ence, though  he  hold  other  collateral  securities  more  than  sufficient 
to  cover  the  excess  of  his  acceptances.  The  same  doctrine  was 
affirmed  by  Lord  Eldon  in  Ex  parte  Bloxham,  8  Ves.  531,  as  equally 
applicable  to  past  and  to  future  acceptances.  The  subsequent  cases 
of  Hey  wood  v.  Watson,  4  Bing.  496,  and  Bramah  v.  Eoberts,  1  Bing. 
N.  C.  469,  and  Percival  v.  Frampton,  2  Cromp.,  Mees.  &  Eosc.  180, 
are  to  the  same  effect.  They  directly  establish  that  a  hona  fide  holder 
taking  a  negotiable  note  in  payment  of  or  as  security  for  a  pre- 
existing debt,  is  a  holder  for  a  valuable  consideration,  entitled  to  pro- 
tection against  all  the  equities  between  the  antecedent  parties.  And 
these  are  the  latest  decisions  which  our  researches  have  enabled  us  to 
ascertain  to  have  been  made  in  the  English  courts  upon  this  subject. 

In  the  American  courts,  as  far  as  we  have  been  able  to  trace  the 
decisions,  the  same  doctrine  seems  generally,  but  not  universally, 
to  prevail.  In  Brush  v.  Scribner,  11  Conn.  388,  the  Supreme  Court 
of  Connecticut,  after  an  elaborate  review  of  the  English  and  New 
York  adjudications,  held,  upon  general  principles  of  commercial 
law,  that  a  pre-existing  debt  was  a  valuable  consideration,  sufficient 
to  convey  a  valid  title  to  a  lona  fide  holder  against  all  the  antecedent 
parties  to  a  negotiable  note.  There  is  no  reason  to  doubt  that  the 
same  rule  has  been  adopted  and  constantly  adhered  to  in  Massa- 
chusetts ;  ^  and  certainly  there  is  no  trace  to  be  found  to  the  contrary. 

1  See  Stoddard  v.  Kimball,  6  Cash.  469 ;  Fisher  v.  Eisher,  98  Mass.  303. 


388  holder's  position. 

In  truth,  in  the  silence  of  any  adjudications  upon  the  subject,  in  a 
case  of  such  frequent  and  almost  daily  occurrence  in  the  commercial 
States,  it  may  fairly  be  presumed  that  whatever  constitutes  a  valid 
and  valuable  consideration  in  other  cases  of  contract,  to  support 
titles  of  the  most  solemn  nature,  is  held,  a  fortiori,  to  be  sufficient 
in  cases  of  negotiable  instruments,  as  indispensable  to  the  security 
of  holders  and  the  facility  and  safety  of  their  circulation.  Be  this 
as  it  may,  we  entertain  no  doubt  that  a  bona  fide  holder  for  a  pre- 
existing debt  of  a  negotiable  instrument,  is  not  affected  by  any 
equities  between  the  antecedent  parties,  where  he  has  received  the 
same  before  it  became  due,  without  notice  of  any  such  equities.  "W^e 
are  all,  therefore,  of  opinion,  that  the  question  on  this  point,  pro- 
pounded by  the  Circuit  Court  for  our  consideration,  ought  to  be 
answered  in  the  negative;  and  we  shall  accordingly  direct  it  so  to 
be  certified  to  the  Circuit  Court. 


GILL   V.    CUBITT. 
Eing's^Bench  of  England,  Michaelmas,  1824.    3  B.  &  C.  466. 

The  rule  formerly  prevailed  that  the  purchaser  of  negotiable  paper  was  charged 
with  notice  df>  defects,  if  he  bought  it  under  such  circumstances  as  to  put  an  ordi- 
narily prudentsiaaik  oa  inquiry. 

Declaration  by  the  plaintiff,  as  indorsee  of  a  bill  of  exchange, 
bearing  date  of  the  19th  of  August,  1823,  drawn  by  one  E.  Evered, 
and  accepted  by  the  defendants.  Plea,  general  issue.  At  the  trial 
before  Abbott,  C.  J.,  at  the  London  sittings  after  Hilary  Term,  1824, 
the  plaintiff  proved  the  handwriting  of  the  acceptors  and  indorser. 
The  defendant  then  proved,  that  on  the  20th  of  August  a  letter 
containing  the  bill  in  question  and  two  others,  was  enclosed  in  a 
parcel  and  delivered  at  the  Green  Man  and  Still  coach  office,  and 
booked  for  Birmingham.  The  parcel  arrived  at  Birmingham  by  the 
coach,  but  the  letter  containing  the  bills  had  been  opened,  and 
the  bills  taken  out  of  it.  On  the  following  day,  the  drawer  advertised 
the  loss  of  the  bills  in  two  newspapers.  The  plaintiff,  who  was  a 
bill  broker  in  London,  then  proved  by  his  nephew,  who  assisted  him 
in  his  business,  that  the  bill  was  brought  to  his  office  between  the 
hours  of  nine  and  ten  on  the  morning  of  the  21st  of  August,  by  a 
person  having  a  respectable  appearance,  and  whose  features  were 
familiar  to  the  witness,  but  whose  name  was  unknown  to  him.  He 
desired  that  the  bill  might  be  discounted  for  him,  but  the  witness 
at  first  declined  so  to  do,  because  the  acceptors  were  not  known  to 
him.  The  person  who  brought  the  bill  then  said,  that  a  few  days 
before  he  had  brought  other  bills  to  the  office,  and  that  if  inquiry 


GILL  V.   CUBITT.  389 

was  made,  it  would  be  found  that  the  parties  whose  names  were 
on  this  bill  were  highly  respectable.  He  then  quitted  the  office  and 
left  the  bill,  and  upon  inquiry  the  witness  was  satisfied  with  the 
names  of  the  acceptors.  The  stranger  returned  after  a  lapse  of  two 
hours  and  indorsed  the  bill  in  the  name  of  Charles  Taylor,  and  re- 
ceived the  full  value  for  it,  the  usual  discount  and  a  commission  of 
two  shillings  being  deducted.  The  witness  did  not  inquire  the  name 
of  the  person  who  brought  the  bill,  or  his  address,  or  whether  he 
brought  it  on  his  own  account  or  otherwise,  or  how  he  came  by  the 
bill.  It  was  the  practice  in  the  plaintiff's  office  not  to  make  any 
inquiries  about  the  drawer  or  other  parties  to  a  bill,  provided  the 
acceptor  was  good.  Upon  this  evidence  the  Lord  Chief  Justice  told 
the  jur}^,  that  there  were  two  questions  for  their  consideration :  first, 
whether  the  plaintiff  had  given  value  for  the  bill,  of  which  there  could 
be  no  doubt;  and,  secondly,  whether  he  took  it  under  circumstances 
which  ought  to  have  excited  the  suspicion  of  a  prudent  and  careful 
man.  If  they  thought  that  he  had  taken  the  bill  under  such  circum- 
stances, then,  notwithstanding  he  had  given  the  full  value  for  it, 
they  ought  to  find  a  verdict  for  the  defendant.  Then  the  Lord  Chief 
Justice,  after  stating  the  evidence  and  commenting  upon  the  prac- 
tice in  the  plaintiff's  office  of  discounting  bills  for  any  persons 
whose  features  were  known  to  him,  but  whose  names  and  abode  were 
unknown,  without  asking  any  questions,  asked  the  jury  what  they 
would  think  if  a  board  were  affixed  over  an  office  with  this  notice, 
"  Bills  discounted  for  persons  whose  features  are  known  and  no 
questions  asked."  The  jury  having  found  a  verdict  for  the  defend- 
ants, a  rule  nisi  for  a  new  trial  was  obtained  in  Easter  term  last, 
upon  the  ground  that  the  plaintiff  having  paid  a  valuable  considera- 
tion for  the  bill,  was  entitled  to  recover  its  value;  and,  secondly, 
that  the  case  had  been  put  too  strongly  to  the  jury,  when  it  was  com- 
pared to  the  case  of  a  public  notice  given  by  a  broker  that  he  would 
discount  all  bills  without  asking  questions. 

[Argument  reported.] 

Abbott,  C.  J.  If  we  thought  that,  upon  reconsideration  of  the 
evidence,  another  jury  ought  to  come  to  a  different  conclusion,  we 
would  send  the  case  down  to  another  trial.  But  being  of  opinion, 
that  the  proper  conclusion  has  been  drawn  from  the  evidence,  we 
think  that  this  rule  ought  to  be  discharged.  I  agree  with  the  counsel 
for  the  plaintiff,  that  this  case  is  hardly  distinguishable  from  Law- 
son  V.  Weston,  4  Esp.  56.  If  there  is  any  distinction  it  is,  that  in 
this  case  the  plaintiff's  clerk  said  it  was  not  usual  with  the  plaintiff 
to  ask  any  questions,  or  to  make  any  inquiry  if  the  bills  were  brought 
to  them  by  persons  whose  features  they  supposed  themselves  to  be 
acquainted  with,  provided  they  were  satisfied  with  the  names  of  the 


390  holder's  position. 

acceptors.  I  cannot  help  thinking  that  if  Lord  Kenyon  had  antici- 
pated the  consequences  which  have  followed  from  the  rule  laid  down 
by  him  in  Lawson  v.  Weston,  he  would  have  paused  before  he  pro- 
nounced that  decision.  Since  the  decision  of  that  case,  the  practice 
of  robbing  stage-coaches  and  other  conveyances  of  securities  of  this 
kind  has  been  very  considerable.  I  cannot  forbear  thinking,  that 
that  practice  has  received  encouragement  by  the  rule  laid  down  in 
Lawson  v.  Weston,  by  which  a  facility  has  been  given  to  the  disposal 
of  stolen  property  of  this  description.  I  should  be  sorry  if  I  were 
to  say  anything,  sitting  in  the  seat  of  judgment,  that  either  might 
have  the  effect,  or  reasonably  be  supposed  to  have  the  effect  of  im- 
peding the  commerce  of  the  country  by  preventing  the  due  and  easy 
circulation  of  paper.  But  I  am  decidedly  of  opinion,  that  no  injury 
will  be  done  to  the  interests  of  commerce,  by  a  decision  that  the 
plaintiff  cannot  recover  in  this  action.  It  appears  to  me  to  be  for 
the  interest  of  commerce,  that  no  person  should  take  a  security  of 
this  kind  from  another  without  using  reasonable  caution.  If  he  take 
such  security  from  a  person  whom  he  knows,  and  whom  he  can  find 
out,  no  complaint  can  be  made  of  him.  In  that  case  he  has  done  all 
any  person  could  do.  But  if  it  is  to  be  laid  down  as  the  law  of  the 
land,  that  a  person  may  take  a  security  of  this  kind  from  a  man  of 
whom  he  knows  nothing,  and  of  whom  he  makes  no  inquiry  at  all, 
it  appears  to  me  that  such  a  decision  would  be  more  injurious  to 
commerce  than  convenient  for  it,  by  reason  of  the  encouragement 
it  would  afford  to  the  purloining,  stealing,  and  defrauding  persons 
of  securities  of  this  sort.  The  interest  of  commerce  requires  that 
hona  fide  and  real  holders  of  bills,  known  to  be  such  by  those  with 
whom  they  are  dealing,  should  have  no  difficulties  thrown  in  their 
way  in  parting  with  them.  But  it  is  not  for  the  interest  of  commerce 
that  any  individual  should  be  enabled  to  dispose  of  bills  or  notes 
without  being  subject  to  inquiry.  I  think  the  sooner  it  is  known 
that  the  case  of  Lawson  v.  Weston  is  doubted,  at  least  by  this  court, 
the  better.  I  wish  doubts  had  been  cast  on  that  case  at  an  earlier 
time.  If  that  had  been  done,  this  plaintiff  probably  would  not  have 
suffered.  Coming  to  the  facts  of  this  case,  they  are  these,  that  the 
young  man,  acting  according  to  the  course  which  the  plaintiff  when 
he  was  present  followed,  gave  money  for  this  bill  to  a  person  of 
whom,  though  he  supposed  he  knew  him,  he  really  knew  nothing. 
This  is  done  at  a  very  early  hour,  between  nine  and  ten  in  the 
morning  on  the  day  after  the  bill  was  lost.  I  cannot  help  saying 
that  that  practice,  in  the  plaintiff's  business  of  a  bill  broker,  is  a 
practice  inconvenient  for  the  reasons  I  have  already  given.  It  seems 
to  me,  that  it  is  a  great  encouragement  to  fraud,  and  it  is  the  duty 
of  the  court  to  lay  down  such  rules  as  will  tend  to  prevent  fraud  and 
robbery,  and  not  give  encouragement  to  them.  For  these  reasons, 
notwithstanding  all  the  unfeigned  reverence  I  feel  for  everything 


GOODMAN   V.   HARVEY.  391 

that  fell  from  Lord  Kenyon,  by  whom  Lawson  v.  Weston  was  decided, 
I  cannot  think  the  view  taken  by  that  learned  lord  at  that  time  was  a 
correct  one ;  and  that  being  so,  I  am  of  opinion  that  this  rule  ought 
to  be  discharged. 

Bayley  and  Holroyd,  J  J.,  delivered  concurring  opinions. 

Bule  discharged. 


GOODMAN   V.   HARVEY. 
King's  Bench  of  England,  Easter,  1836.     4  Ad.  &  E.  870. 

That  rule  was  overturned,  however,  being  deemed  not  the  rule  of  the  law  mer- 
chant ;  and  it  is  now  generally  held  that  even  gross  negligence  by  the  transferee  in 
the  purchase  of  a  negotiable  instrument  will  not  disentitle  him  to  claim  as  a  bona 
fide  holder  ;  notice  or  knowledge  of  facts  sufficient  to  put  a  prudent  man  on  inquiry, 
in  the  commou-law  sense,  is  not,  of  itself,  bad  faith.^ 

Assumpsit  on  a  bill  of  exchange  drawn  by  the  defendants,  payable 
to  the  order  of  John  Scott,  indorsed  by  Scott,  and,  later,  by  David 
Levy  to  the  plaintiff.  The  first  count  alleged  non-acceptance,  the 
second,  non-payment.    Plea,  non  assumpsit. 

The  bill  was  given  by  the  defendants,  merchants  at  Limerick,  to 
Scott,  for  a  balance  of  freight.  Scott  put  the  bill  into  the  hands  of 
one  Hudson  to  procure  a  discount  of  it  for  him  (Scott),  and  Hud- 
son handed  it  to  Levy  for  the  same  purpose.  The  drawees  refused 
acceptance  in  consequence  of  receiving  from  the  defendants  a  notice 
warning  them  not  to  pay  any  money  to  Scott,  as  the  party  giving 
notice  was  about  forthwith  to  sue  out  a  commission  of  bankrupt 
against  him.^  The  bill  was  noted  for  non-acceptance,  and  protested. 
No  notice  of  the  non-acceptance  was  given  to  the  defendants.  Levy 
now  returned  the  bill  to  Hudson,  who  gave  it  back  to  Scott.  Scott 
soon  afterwards  gave  it  to  Hudson  again  to  obtain  a  discount  of  it. 
Hudson  now  placed  the  bill  as  before  in  the  hands  of  Levy,  who, 
before  maturity,  but  in  fraud  of  Scott,  indorsed  and  procured  it  to 
be  discounted  by  the  plaintiif.  Levy  retained  the  proceeds,  and  had 
never  given  value  for  the  bill. 

When  the  bill  became  due  the  plaintiff  presented  it  for  payment, 
and  pa}Tnent  was  refused.  The  drawees  had  funds,  but  the  right  to 
the  proceeds  was  contested.  The  funds  were  furnished  a  day  or  two 
before;  at  the  time  of  non-acceptance  the  drawees  had  not  funds. 
The  bill  was  protested  for  non-payment,  and  notice  sent  to  the 
defendants. 

It  was  objected  for  the  defendants  that  the  plaintiff,  in  taking 

1  N.  I.  L.  §  73. 

2  The  commission  afterwards  issued,  and  this  action,  it  was  understood,  was  defended 
by  Scott's  assignees. 


392  holder's  position. 

1 

the  bill  from  Levy  with  the  notarial  marks  upon  it,  had  been  guilty 
of  gross  negligence,  and  therefore  took  the  bill  with  all  its  vices,  and 
so  could  have  no  better  right  to  recover  upon  it  than  Levy  himself, 
who  clearly  would  have  had  none.  The  Lord  Chief  Justice  [Denman] 
was  of  the  same  opinion,  observing  that  the  plaintiff  had  received  the 
bill  with  a  death-wound  apparent  on  it.  The  jury,  in  answer  to  a 
question  from  the  Lord  Chief  Justice,  said  that,  in  their  opinion, 
the  notary's  marks  on  the  bill  were  sufficient  notice  to  an  indorsee 
of  non-acceptance. 

A  nonsuit  was  then  taken;  and  in  the  next  term  motion  for  a 
new  trial  was  made,  on  the  ground  that  the  ruling  against  the  plain- 
tiff was  wrong ;  that  the  bill  had  been  lawfully  sent  into  the  market 
by  Scott  while  not  yet  due;  and  that  the  plaintiff,  who  had  taken 
it  before  maturity  and  had  given  value  for  it,  had  a  right  to  recover 
the  amount,  notwithstanding  any  defect  in  the  title  of  an  interme- 
diate party.  A  rule  nisi  was  granted;  in  the  argument  of  which  it 
was  urged,  and  conceded  by  the  court,  that  the  defendants  were  not 
entitled  to  notice  of  the  non-acceptance. 

[Argument  reported.] 

Lord  Denman^,  C.  J.  The  question  I  offered  to  submit  to  the 
jury  was  whether  the  plaintiff  had  been  guilty  of  gross  negligence 
or  not.  I  believe  we  are  all  of  opinion  that  gross  negligence  only 
would  not  be  a  sufficient  answer  where  the  party  has  given  consider- 
ation for  the  bill.  Gross  negligence  may  be  evidence  of  mala  fides, 
but  is  not  the  same  thing.  We  have  shaken  off  the  last  remnant  of 
the  contrary  doctrine.  Where  the  bill  has  passed  to  the  plaintiff 
without  any  proof  of  bad  faith  in  him,  there  is  no  objection  to  his 
title.  The  evidence  in  this  case  as  to  the  notarial  marks  could  only 
weigh  as  rendering  it  less  likely  that  the  bill  should  have  been  taken 
in  perfect  good  faith.    The  rule  must  be  absolute. 

LiTTLEDALE  Patteson  and  Coleridge,  JJ.,  concurred. 

Rule  absolute. 

Note.  —  The  plaintiff  took  the  bill  with  notice,  in  the  notarial  marks,  that 
acceptance  had  been  refused ;  but  the  defendants  were  not  entitled  to  notice 
of  dishonor,  and  the  notarial  marks  did  not  necessarily  suggest  that  the  defend- 
a7its  had  any  other  defence  to  the  bill  than  want  of  notice.  It  was  only  a  case 
in  which  the  marks  might  have  put  a  more  careful  man  upon  inquu-y;  an  in- 
quiry which  might  have  led  to  a  discovery  of  the  fraud  on  Scott,  thus  bringing 
to  light  the  defence. 

The  contrary  doctrine  of  constructive  notice  from  knowledge  of  facts  which 
would  put  a  man  of  ordinary  prudence  on  inquiry,  was  first  laid  down  in  Gill 
V.  Cubitt.  3  B.  &  C.  466,  ante,  p.  388,  overturning  the  prior  law  in  England. 

Excepting  the  single  case  of  taking  in  bad  faith,  —  that  is.  where,  in  case 
of  an  equity,  the  taker  suspects  an  equity,  but  will  not  inquire,  —  the  de- 
cision in  Goodman  v.  Harvey,  supra,  leaves  nothing  of  the  doctrine  of  con- 


DRESSER  V.   MISSOURI,    ETC.    CONSTRUCTION   COMPANY.  393 

structive  notice  by  putting  upon  inquiry.  One  is  not  put  upon  inquiry  unless 
one  in  fact  suspects.  That  is  the  rule  in  England,  and  the  more  general  rule 
in  this  country.  But  a  few  of  our  courts  adhere  to  the  doctrine  of  construc- 
tive notice  to  the  full,  and  fix  upon  the  purchaser  the  disability  of  notice  wher- 
ever a  prudent  man  would  inquire.     Bigelow,  Bills  and  Notes,  235-288. 


DEESSEE  V.  MISSOUEI,  ETC.  CON'STEUCTION"  COMPAN"Y. 

Supreme  Court  of  the  United  States,  October,  1876.     93  U.  S.  92. 

Whether  the  transferee  is  a  holder  in  good  faith  is  to  be  determined  as  of  the  time 
of  indorsement  and  payment  of  the  consideration.  If  part  only  of  the  consideration  is 
paid  at  the  time  of  iudorsemeat,  and  the  transferee  receives  notice  of  a  defect  before 
paying  the  balance,  he  will  be  deemed  a  bona  fide  holder  to  the  extent  only  of  the 
amount  paid  before  receiving  notice.^ 

The  case  is  stated  in  the  opinion. 
[Argument  not  reported.] 

Mr.  Justice  Hunt.  This  action  is  brought  upon  three  several 
promissory  notes  made  by  the  Missouri  and  Iowa  Eailway  Construc- 
tion Company,  dated  November  1,  1872,  payable  at  two,  three,  and 
four  months,  to  the  order  of  William  Irwin,  for  the  aggregate 
amount  of  $10,000. 

The  defence  is  made  that  they  were  obtained  by  his  fraudulent 
representations. 

But  a  single  point  requires  discussion.  Conceding  that  the  present 
plaintiff  received  the  notes  before  maturit}^  and  that  his  holding  is 
})ona  fde.  the  question  is  as  to  the  amount  of  his  recovery. 

Under  the  ruling  of  the  court  he  recovered  $500.  His  contesta- 
tion is,  that  he  is  entitled  to  recover  the  face  of  the  note,  with  interest. 

After  the  evidence  was  concluded,  the  plaintiff  asked  the  court 
to  charge  the  jury,  that  if  they  believed,  from  the  evidence,  that  the 
plaintiff  purchased  the  notes  in  controversy  of  William  Irwin  for  a 
valuable  consideration,  on  the  1st  of  November,  1873,  and  paid 
$500,  part  of  the  consideration,  on  21st  of  January,  1873,  before 
any  notice  of  any  fraud  in  the  contract,  he  was  entitled  to  recover 
the  whole  amount  of  the  notes;  and  the  court  refused  this  instruc- 
tion.    But  the  court  charged  the  jury,  — 

"  That,  in  the  first  place,  the  jury  must  find  that  there  was  fraud 
in  the  inception  of  the  notes  as  alleged;  and  that  if  the  defendants 
failed  to  satisfy  the  jury  of  that  fact,  the  whole  defence  fails. 

That  if  the  fact  of  fraud  be  established,  and  the  jurj'  find  from 

1  N.  I.  L.  §  71. 


394  holder's  position. 

the  evidence  that  the  plaintiff  paid  $500  upon  the  notes  without 
notice  of  the  fraud,  and  that  after  receiving  notice  of  the  fraud  the 
I  plaintiff  paid  the  balance  due  upon  the  notes,  he  is  protected  only 
pro  tanto;  that  is,  to  the  amount  paid  before  he  received  notice." 

It  does  not  appear  that,  upon  the  purchase  of  the  notes  in  suit, 
the  plaintiff  gave  his  note  or  other  obligation  which  might  by  its 
transfer  subject  him  to  liability.  His  agreement  seems  to  have  been 
an  oral  one  merely,  —  to  pay  the  amount  agreed  upon,  as  should  be 
required;  and  he  had  paid  $500,  and  no  more,  when  notice  of  the 
fraud  was  brought  home  to  him. 

The  argument  of  the  plaintiff  in  error  is  that  negotiable  paper 
may  be  sold  for  such  sum  as  the  parties  may  agree  upon,  and  that, 
whether  such  sum  is  large  or  small,  the  title  to  the  entire  paper 
passes  to  the  purchaser.  This  is  true ;  and  if  the  plaintiff  had  bought 
the  notes  in  suit  for  $500,  before  maturity  and  without  notice  of 
any  defence,  and  paid  that  sum,  or  given  his  negotiable  note  there- 
for, the  authorities  cited  show  that  the  whole  interest  in  the  notes 
would  have  passed  to  him,  and  he  conld  have  recovered  the  full 
amount  due  upon  them.  Fowler  v.  Strickland,  107  Mass.  552  ;  Park 
Bank  v.  Watson,  42  N.  Y.  490 ;  Bank  of  Michigan  v.  Green,  33  Iowa, 
140.  The  present  case  differs  from  the  cases  referred  to  in  this 
respect.  The  notes  in  question  were  purchased  upon  an  unexecuted 
contract,  upon  which  $500  only  had  been  paid  when  notice  of  the 
fraud  and  a  prohibition  to  pay  was  received  by  the  purchaser.  The 
residue  of  the  contract  on  the  part  of  the  purchaser  is  unperformed, 
and  honesty  and  fair  dealing  require  that  he  should  not  perform  it; 
certainly,  that  he  should  not  be  permitted,  by  performing  it,  to 
obtain  from  the  defendants  money  which  they  ought  not  to  pay.  As 
to  what  he  pays  after  notice,  he  is  not  a  purchaser  in  good  faith. 
He  then  pays  with  knowledge  of  the  fraud,  to  which  he  becomes  a 
consenting  party.  One  who  pays  with  knowledge  of  a  fraud  is  in 
no  better  position  than  if  he  had  not  paid  at  all.  He  has  no  greater 
equity,  and  receives  no  greater  protection.  Such  is  the  rule  as  to 
contracts  generally.  In  the  case  of  the  sale  of  real  estate  for  a  sum 
payable  in  instalments,  and  circumstances  occur  showing  the  exist- 
ence of  fraud,  or  that  it  would  be  inequitable  to  take  the  title,  the 
purchaser  can  recover  back  the  sum  paid  before  notice  of  the  fraud 
but  not  that  paid  afterwards.  Barnard  v.  Campbell,  65  Barb.  286 ; 
Lewis  V.  Bradford,  10  Watts,  82 ;  Juvenal  v.  Jackson,  2  Harris,  529 ; 
2  Harris,  430 ;  Youst  v.  Martin,  3  S.  &  E.  423,  430. 

In  Weaver  v.  Barden,  49  IST.  Y.  291,  the  court  use  this  language; 
"  To  entitle  a  purchaser  to  the  protection  of  a  court  of  equity,  as 
asrainst  a  legal  title  or  a  prior  equity,  he  must  not  only  be  a  pur- 
chaser without  notice,  but  he  must  be  a  purchaser  for  a  valuable 
consideration;  that  is,  for  value  paid.  "VMiere  a  man  purchases 
an  estate,   pays  part  and  gives  bonds   for  the   residue,   notice   of 


DRESSER   V.   MISSOURI,  ETC.   CONSTRUCTION   COMPANY.  395 

an  equitable  incumbrance  before  payment  of  the  money,  though 
after  giving  the  bond,  is  sufficient.  Touville  v.  Naish,  3  P.  Wms. 
306;  Story  v.  Lord  Windsor,  2  Atk.  630.  Mere  security  to  pay 
the  purchase  price  is  not  a  purchase  for  a  valuable  consideration. 
Hardingham  v.  Nicholls,  3  Atk.  304;  Maundrell  v.  Maundrell,  10 
Ves.  246,  271 ;  Jackson  v.  Cadwell,  1  Cowen,  622 ;  Jewell  v.  Palmer, 
7  J.  C.  65.  The  decisions  are  placed  upon  the  ground,  according 
to  Lord  Hardwicke,  that  if  the  money  is  not  actually  paid  the  pur- 
chaser is  not  hurt.    He  can  be  released  from  his  bond  in  equity." 

The  plaintiff  here  occupies  the  same  position  as  the  bona  fide  pur- 
chaser of  the  first  of  a  series  of  notes,  of  which,  after  notice  of  a 
fraud,  he  purchases  the  rest  of  the  series.  He  is  protected  so  far  as 
his  good  faith  covers  the  purchase,  and  no  farther. 

Upon  receiving  notice  of  the  fraud,  his  duty  was  to  refuse  further 
payment;  and  the  facts  before  us  required  such  refusal  by  him. 
Authorities  supra. 

Crandell  v.  Vickery,  45  Barb.  156,  is  in  point.  Holdridge  had 
obtained  the  indorsement  by  Vickery  of  his  (Holdridge's)  notes  by 
false  and  fraudulent  representations.  These  notes  were  transferred 
to  Crandell  without  notice  or  knowledge  of  the  fraud,  he  giving  to 
Holdridge  several  cheques  for  the  amount,  upon  the  understanding 
that  they  were  not  to  be  presented  for  payment,  but  when  the  money 
was  wanted,  he  was  to  give  new  cheques  as  needed.  Before  giving 
the  new  cheques,  plaintiff  was  informed  of  the  fraud,  and  requested 
not  to  make  payment,  or  to  give  his  cheques.  He  did,  however,  give 
his  new  cheques,  according  to  the  original  agreement,  and  brought 
suit  upon  the  notes  against  Vickery,  the  indorser. 

It  was  held  that  he  was  not  a  bona  fide  holder,  for  the  reason  that 
the  transaction  was  executory  when  he  received  notice  of  the  fraud; 
that  he  had  then  parted  with  no  value ;  that  the  real  obligations  were 
given  afterwards,  and  under  circumstances  that  afforded  no  pro- 
tection. 

That  case  is  stronger  for  the  holder  than  the  one  before  us,  in 
the  fact  that  cheques  were  there  given  on  the  original  transaction, 
which  might  have  been  presented  or  passed  off  to  the  prejudice  of 
the  maker;   while  here  the  transaction  was  oral  throughout. 

To  the  same  purport  in  principle,  although  upon  facts  somewhat 
different,  are  the  cases  of  Garland  v.  The  Salem  Bank,  9  Mass.  408, 
The  Fulton  Bank  v.  The  Phoenix  Bank,  1  Hall,  562,  and  White  v. 
Springfield  Bank,  3  Sandf.  S.  C.  227.^ 

The  cases  are  numerous  that  where  a  bona  fide  holder  takes  a  note 
misappropriated,  fraudulently  obtained,  or  without  consideration, 
as  collateral  security,  he  holds  for  the  amount  advanced  upon  it, 
and  for  that  amount  only.    Williams  v.  Smith,  2  Hill,  301. 

In  Allaire  v.  Hartshorn,  1  Zabr.  663,  the  case  was  this :  Hartshorn 
1  Sandford's  Superior  Court  Reports,  New  York. 


396  holder's  position. 

sued  Allaire  on  a  note  of  $1500  at  ninety  days,  made  by  Allaire.  It 
was  proved  that  the  note  had  been  misapplied  by  one  Pettis,  to  whom 
it  had  been  intrusted;  that  he  had  pledged  it  to  the  plaintiff  as 
security  for  $750  borrowed  of  him  on  Hegement's  cheque,  and  also 
as  security  for  a  $400  acceptance  of  another  party  then  given  up  to 
Pettis. 

On  the  trial,  the  court  charged  the  jury,  that,  if  any  considera- 
tion was  given  by  the  plaintiff  for  the  note,  "  they  should  not  limit 
their  verdict  to  the  amount  so  given,  but  should  find  the  whole  amount 
due  on  the  face  of  the  note."  The  case  was  carried  to  the  Court  of 
Errors  and  Appeals  of  the  State  of  New  Jersey,  upon  an  exception 
to  this  charge.  The  court  reversed  the  judgment,  holding  that, 
although  a  bona  fide  holder,  Hartshorn  could  recover  only  the 
amount  of  his  advances. 

The  case  before  us  is  governed  by  the  rule  that  the  portion  of  an 
unperformed  contract  which  is  completed  after  notice  of  a  fraud 
is  not  within  the  principle  which  protects  a  bona  fide  purchaser. 

No  respectable  authority  has  been  cited  to  us  sustaining  a  con- 
trary position,  nor  have  we  been  able  to  find  ^ny.  The  judgment 
below  is  based  upon  authority,  and  upon  the  soundest  principles  of 
honesty  and  fair  dealing.     It  has  our  concurrence,  and  is 

Affirmed. 


HASCALL   V.   WHITMOEE. 

Supreme  Court  of  Maine,  April,  1841.     19  Maine,  102. 

One  who  purchases  commercial  paper  for  value,  with  notice  of  defect  in  its  incep- 
tion, from  a  bona  fide  holder  without  notice,  stands  upon  the  rights  of  the  latter,  and 
may  recover  the  amount  of  the  paper.  * 

The  case  is  stated  in  the  opinion  of  the  court. 

[Argument  reported.] 

Shepley,  J.  The  plaintiffs  are  joint  owners  of  a  negotiable 
promissory  note  purchased  before  it  became  payable.  One  of  them  is 
a  holder  for  value  without  notice;  the  other  with  notice,  but  deriving 
his  title  through  others  who  were  bona  fide  holders  without  notice. 
As  between  the  original  parties  the  note  may  be  regarded  as  made 
without  consideration.  Andrews,  who  was  the  first  and  an  innocent 
indorsee  for  value,  did  not  indorse  it  when  he  disposed  of  it,  and  he 
was  properly  admitted  as  a  witness,  "V\Tiitaker  v.  Brown,  8  Wend. 
490.  He  could  have  collected  it,  for  the  want  of  consideration  could 
not  be  set  up  against  him.    A  knowledge  of  the  facts  acquired  after- 

1  N.  I.  L.  §  75. 


HASCALL  V.   WHITMORE.  397 

ward  would  not  affect  his  rights.  He  had  not  only  a  legal  right  to 
hold  and  collect  it,  but  to  negotiate  it.  And  the  maker  could  not 
impair  that  right  by  giving  notice  that  it  was  made  without  con- 
sideration. Nor  would  he  be  injured  by  a  transfer  to  one  having  a 
full  knowledge  of  the  facts;  for  his  position  would  not  be  more 
unfavorable  than  before. 

Bayley  states  that  the  want  of  consideration  cannot  be  insisted 
upon  "  if  the  plaintiff,  or  any  intermediate  party  between  him  and 
the  defendant,  took  the  bill  or  note  hona  fide  and  upon  a  valuable 
consideration."     Bayley,  550,  ed.  by  Phillips  &  Sewall. 

The  case  of  Thomas  v.  Newton,  3  Car.  &  P.  606,  was  assumpsit 
on  a  bill  dravm  by  Wilson  on  the  defendant  and  accepted,  and  by  him 
indorsed  to  Dandridge  and  by  him  to  the  plaintiff.  The  defence 
was  a  want  of  consideration.  Lord  Tenterden  says :  "  If  the  defend- 
ant shows  that  there  was  originally  no  consideration  for  the  bill, 
that  throws  it  on  the  plaintiff  to  show  that  he  gave  value  for  it,  or 
that  value  was  given  for  it  by  Dandridge ;  ^  for  if  either  the  plain- 
tiff or  Dandridge  gave  value  for  it,  the  plaintiff  may  recover;  other- 
wise the  defendant  is  entitled  to  recover." 

In  Solomons  v.  The  Bank  of  England,  13  East,  134,  135,  note  h, 
it  appeared  that  the  bank-note  had  been  obtained  fraudulently  from 
Batson  &  Co.,  who  informed  the  bank  of  it.  The  plaintiff  as  holder 
claimed  pa\Tnent  of  the  bank,  and  it  was  refused.  He  had  received 
the  bill  of  Hendricks  &  Co. ;  and  it  did  not  appear  that  he  paid  value 
for  it  before  notice.  Lord  Kenyon  says :  "  Upon  this  evidence  I 
think  Solomons  must  be  considered  to  be  in  the  same  situation  as 
Hendricks  &  Co."  But  as  it  did  not  appear  that  they  were  holders 
for  value  without  notice,  the  plaintiff  did  not  recover. 

In  Smith  v.  Hiscock,  14  Maine,  449,  where  a  negotiable  promissory 
note  had  been  indorsed  hona  fide  and  for  value  before  it  was  payable, 
the  Chief  Justice  says :  "  The  want  of  consideration  is  not  an  avail- 
able defence  against  a  subsequent  holder,  to  whom  it  may  have  been 
passed  after  it  was  due.  The  promise  is  good  to  the  first  indorsee 
free  from  that  objection;  and  the  power  of  transferring  it  to  others 
with  the  same  immunity  is  incident  to  the  legal  right  which  he  had 
acquired  in  the  instrument.  By  the  first  negotiation  the  want  of 
consideration  between  the  original  parties  ceases  as  a  valid  ground 
of  defence." 

If  the  relations  between  the  maker  and  the  holder  only  were  to  be 
considered,  the  want  of  consideration  would  be  a  good  defence  against 
one  who  did  not  purchase  for  value,  or  who  did  so  after  it  was  once 
due.  And  yet  it  has  been  decided  that  one  bo  situated  may  avoid 
that  defence  by  showing  that  it  could  not  have  been  interposed 
against  a  prior  holder.     The  same  principle  appears  to  be  equally 

1  This  doctrine  has  been  exploded.  See  Bigelow,  Bills  and  Notes,  252  ;  Paton  v. 
Coit,  post,  p.  457.     Cf.  N.  I.  L.  §  76. 


398  holder's  position. 

applicable  to  a  holder  who  has  purchased  with  notice.  If  the  rela- 
tions between  himself  and  the  maker  only  were  to  be  considered,  he 
eould  not  recover;  but  purchasing  of  one  who  had  no  notice,  he 
must  be  considered  to  be  in  the  same  situation  and  as  entitled  to 
the  same  protection. 

Defendant  defaulted  and  judgment  for  amount  due  on  the  note. 


CHEEVEK  V.   THE  PITTSBUEGH,  ETC.  EAILKOAD  CO. 

Court  of  Appeals  of  New  York,  October,  1896.     150  N.  Y.  59; 
44  N.  E.  Rep.  701. 

And  this  is  true  though  the  purchase  be  after  maturity. 

Action  by  the  indorsee  against  the  maker  of  a  promissory  note. 
The  facts  are  stated  in  the  opinion. 

[Argument  reported.] 

O'Brien,  J.  The  complaint  in  this  action  contained  four  sep- 
arate causes  of  action,  each  upon  a  promissory  note  of  the  defendant. 
The  last  two  causes  of  action  were  not  defended,  and  upon  these 
the  plaintiff  recovered,  but  was  defeated  upon  the  two  notes  embraced 
in  the  first  and  second  causes  of  action.  The  defence  to  these  two 
notes  was  that  they  were  made  by  the  defendant's  president,  one 
M.  S.  Frost,  and  by  him  wrongfully  diverted  from  the  uses  and  pur- 
poses for  which  they  were  intended  to  his  own  personal  or  private 
benefit,  or  the  benefit  of  a  firm  of  which  he  was  a  member,  and  that 
the  plaintiff  is  not  a  bona  fide  holder,  but  chargeable  with  notice  of 
these  facts. 

The  following  are  copies  of  the  two  notes  in  controversy,  with  the 
indorsements  thereon  when  put  in  circulation  by  the  defendant's 
president : 

"  $5000.  Greenville,  Pa.,  Eeb'y  34th,  1888. 

Four  months  after  date  the  Pittsburgh,  Shenango  and  Lake  Erie 
Eailroad  Company  promises  to  pay  to  the  order  of  John  T.  Bruen  five 
thousand  dollars,  at  the  American  Exchange  National  Bank,  New 
York  City. 

The  Pittsburgh,  Shenango  &  Lake  Erie  Eailroad  Company. 

By  M.  S.  Frost, 
Value  received.  President. 

Attest, 
E.  S.  Templeton,  Secretary." 


CHEEVER   V.   THE   PITTSBURGH,   ETC.   RAILROAD   CO.  399 

Indorsed : 

"  Pay  to  the  order  of  M.  S.  Frost  &  Son, 

John  T.  Bruen', 

M.  S.  Frost  &  Son." 

"  $5000.00  Greenville,  Pa.,  Feb'y  24th,  1888. 

Three  months  after  date  the  Pittsburgh,  Shenango  and  Lake  Erie 
Eailroad  Company  promises  to  pay  to  the  order  of  John  T.  Bruen 
five  thousand  dollars,  at  the  American  Exchange  National  Bank, 
Few  York  City. 

The  Pittsburgh,  Shenango  &  Lake  Erie  Eailroad  Company. 

By  M.  S.  Frost, 
Value  received.  President. 

Attest, 

E.  S.  Templeton,  Secretary." 

Indorsed : 

"John  T.  Bruen, 
M.  S.  Frost  &  Son." 

The  body  of  these  notes  and  every  part  of  them  except  the  signature 
of  the  president  was  in  the  hand\vTiting  of  Templeton,  the  secretary. 
The  president  was  authorized  by  the  board  of  directors  to  issue  the 
corporate  notes  to  the  extent  of  $10,000  for  the  purpose  of  purchasing 
flat  cars.  In  March,  1888,  before  the  notes  became  due,  Frost  went 
to  Boston  and  there  negotiated  a  cash  loan  of  $30,000  from  Francis 
A.  Brooks  for  the  benefit  of  M.  S.  Frost  &  Son,  giving  the  firm  note 
therefor  and  delivering  to  him  the  two  notes  in  question,  indorsed  as 
they  now  appear,  with  other  obligations,  as  collateral  security  for  the 
payment  of  this  loan.  Subsequent  to  the  maturity  of  the  notes  Brooks 
became  the  absolute  owner  by  consent  of  the  pledgor  and  the  proceeds 
applied  upon  the  debt,  and  still  later  he  transferred  them  to  a  third 
party,  and  they  have  come  to  the  hands  of  the  plaintiff  for  value. 
It  is  not  claimed  that  the  plaintiff  occupies  any  other  or  different 
position  than  Brooks  would  if  he  had  brought  the  action  upon  the 
notes  at  maturity.  Bruen,  the  payee  of  the  notes,  was  the  private 
secretary  of  Frost,  the  president,  and  the  notes  were  made  payable 
to  him  by  Templeton,  the  secretary  of  defendant,  who  drew  them 
in  that  form  at  the  suggestion  of  the  president.  There  is  not  and 
cannot  be  any  dispute  with  respect  to  the  authority  of  Frost  to 
make  the  notes.  They  were  made  with  sufficient  authority,  the  fraud 
upon  the  defendant  consisting  in  the  wrongful  use  of  them  when 
made  for  a  legitimate  purpose  by  the  president  for  his  own  private 
business. 

Nor  is  there  any  dispute  with  respect  to  the  fact  appearing  on  the 


400  holder's  position. 

plaintiff's  case,  that  Brooks  paid  value  for  the  notes  and  made  present 
advances  in  cash  to  Frost  in  the  sum  already  stated.  It  is  equally 
clear  upon  the  record  that  Brooks  had  no  actual  knowledge  of  the 
facts  surrounding  the  origin  of  the  paper  or  of  the  diversion  of  it 
by  the  president.  He  received  the  notes  and  made  the  advances 
in  Boston,  whereas  they  were  made  and  the  transactions  stated  with 
respect  to  them  took  place  in  a  distant  state,  where  the  office  of  the 
company  was,  and  is  indicated  on  the  paper  as  the  place  where  made. 

Tlie  learned  trial  judge  held  as  matter  of  law  that  the  plaintiff 
could  not  recover  upon  the  notes  for  the  reason  that  he  was  chargeable 
with  knowledge  of  the  facts  and  circumstances  that  rendered  them 
invalid  in  the  hands  of  Frost.  The  plaintiff  is,  doubtless,  charge- 
able with  such  knowledge  or  notice  as  to  the  antecedent  equities  of 
the  defendant  as  Brooks,  his  assignor,  had,  but  with  no  others.  If 
the  notes  were  valid  obligations  in  the  hands  of  Brooks  the  plaintiff 
may  assert  every  right  that  he  could  have  asserted.  It  needs  no  argu- 
ment to  show  that  if  Brooks  had  knowledge  or  notice,  or  is  in  law 
chargeable  with  knowledge  or  notice  of  the  fraud  by  means  of  which 
the  notes  were  diverted  from  the  purpose  for  which  they  were  author- 
ized to  be  made,  that  the  plaintiff  cannot  recover.  But  it  is  not 
claimed  that  he  knew  anything  about  the  origin  or  diversion  of  the 
paper  in  fact.  All  that  is  claimed  is  that  when  it  was  presented 
to  him  in  Boston  by  Frost,  whom  he  knew  to  be  the  president  of  the 
railroad,  there  was  enough  upon  the  face  of  the  paper  to  put  him 
upon  inquiry,  and,  therefore,  to  charge  him  with  knowledge  of  all 
the  facts  that  such  inquiry  would  have  disclosed.  He  knew  nothing, 
so  far  as  appears,  outside  of  the  paper  itself,  except  the  fact  that 
the  party  presenting  it  was  defendant's  president  and  that  he  was 
proposing  to  pledge  the  notes  for  his  own  debt,  or  rather  for  the 
debt  of  his  firm,  which  for  all  the  purposes  of  the  question  may  be 
assumed  to  be  the  same  thing.  The  question  in  the  case  is,  therefore, 
reduced  to  a  very  narrow  inquiry,  and  that  is  whether  Brooks,  stand- 
ing in  all  other  respects  in  the  position  and  sustaining  the  character 
of  a  bona  fide  purchaser  of  negotiable  paper,  is  deprived  of  that 
character  and  the  benefits  of  that  position  by  reason  of  anything 
appearing  upon  the  face  of  the  notes  themselves. 

The  mind,  at  the  threshold  of  the  inquiry,  encounters  two  prin- 
ciples that  point  in  opposite  directions  and  lead  to  different 
conclusions,  as  the  one  or  the  other  is  allowed  to  preponderate  in 
the  mental  process  of  determining  the  legal  rights  of  the  parties. 
On  the  one  hand  is  the  principle  which  protects  a  bona  fide  holder 
of  commercial  paper  from  existing  antecedent  equities  between  the 
parties,  and  on  the  other  the  principle  which  protects  a  corporation 
from  the  unauthorized  and  fraudulent  acts  of  its  own  officers.  There 
is  not  much  difficulty  in  stating  the  rule  of  law  defining  the  duties 
and  obligations  of  a  party  to  whom  negotiable  paper  is  presented 


CHEEVER  V.   THE  PITTSBURGH,  ETC.  RAILROAD  CO.     401 

for  discount  or  sale  before  due.  He  is  not  bound  at  his  peril  to  be 
on  the  alert  for  circumstances  which  might  possibly  excite  the  sus- 
picion of  wary  vigilance;  he  does  not  owe  to  the  party  who  puts  the 
paper  afloat  the  duty  of  active  inquiry  in  order  to  avert  the  imputa- 
tion of  bad  faith.  The  rights  of  the  holder  are  to  be  determined 
by  the  simple  test  of  honesty  and  good  faith,  and  not  by  a  speculative 
issue  as  to  his  diligence  or  negligence.  The  holder's  rights  cannot 
be  defeated  without  proof  of  actual  notice  of  the  defect  in  title  or 
bad  faith  on  his  part  evidenced  by  circumstances.  Though  he  may 
have  been  negligent  in  taking  the  paper,  and  omitted  precautions 
which  a  prudent  man  would  have  taken,  nevertheless,  unless  he 
acted  mala  fide,  his  title,  according  to  settled  doctrine,  will  prevail. 
Magee  v.  Badger,  34  N.  Y.  249 ;  Am.  Ex.  Nat.  Bk.  v.  N.  Y.  Belting, 
etc.  Co.,  148  N.  Y.  705 ;  Know  v.  Eden  Musee  Am.  Co.,  148  N.  Y. 
454;  Canajoharie  Nat.  Bk.  v.  Diefendorf,  123  N.  Y.  202;  Vosburgh 
V.  Diefendorf,  119  N.  Y.  357;  Jarvis  v.  Manhattan  Beach  Co.,  148 
N.  Y.  652.1 

Applying  these  rules  to  the  conceded  facts  of  the  case,  it  seems 
to  me  to  be  impossible  to  impute  bad  faith  to  Brooks  in  the  trans- 
action. He  advanced  a  large  sum  of  money  on  the  faith  of  the  paper, 
without  any  actual  knowledge  that  the  relations  of  the  party  with 
whom  he  dealt  to  the  paper  were  different  from  what  they  appeared 
to  be  on  the  face  of  it.  The  question  now  is,  not  what  the  facts  were, 
but  what  they  appeared  to  be,  and  what  he  had  the  right,  from  the 
notes  themselves,  to  assume.  He  had  the  right  to  assume  that  the 
relations  to  the  paper  of  every  party  whose  name  appeared  on  it 
were  precisely  what  they  appeared  to  be.  Hoge  v.  Lansing,  35 
N.  Y.  136.  He  had  the  right  to  believe  that  the  notes  had  been 
issued  by  the  defendant  to  Bruen  for  value  in  the  regular  course  of 
business,  and  were  by  him  transferred  to  Frost  &  Son  in  like 
manner.  There  was  nothing  to  suggest  to  him  that  Frost  was 
dealing  with  paper  that  belonged  to  the  railroad  for  his  own  bene- 
fit. The  appearances  were  that  the  defendant  had  put  the  notes 
in  circulation  by  delivery  to  Bruen,  and  that  they  came  to  Frost's 
firm  in  the  regular  course  of  business  for  value  and  were  then  the 
property  of  the  firm.  It  is  quite  true  that  all  these  appearances 
were  deceptive  and  that  the  actual  facts  were  otherwise.  But  how  was 
a  banker  or  business  man  in  Boston  to  know  or  suspect  that  Bruen 
was  only  the  nominal  payee  and  a  mere  instrument  in  the  transaction 
to  enable  the  president  to  divert  the  paper  to  his  own  use.  The 
name  of  the  party  who  presented  it  and  had  it  in  his  possession 
appeared  on  the  face  of  the  paper  to  have  signed  it  as  president. 
The  name  of  another  ofiicer  of  the  corporation  was  upon  it  also, 
attesting  its  regularity,  and  everything  was  in  his  handwriting  ex- 

1  And  see  Goodman  v.  Harrey,  ante,  p.  391 ;  N.  I.  L.  §  73. 
26 


402  holdek's  position. 

cept  the  signature  of  the  president  and  the  indorsement  of  the  payee. 
So  far  as  Brooks  was  concerned,  the  paper  showed  that  it  had  heen 
issued  to  a  stranger  in  the  regular  course  of  husiness,  and,  through 
his  indorsement,  had  come  to  the  hands  of  a  mercantile  firm  of  which 
the  president  of  the  corporation  was  a  member.  If  this  were  the  fact, 
there  is  no  doubt  as  to  his  right  to  use  it  in  the  business  of  the  firm. 
The  holder  of  a  note  who  has  no  actual  knowledge  or  notice  of  a 
defect  in  the  title,  or  other  equities  between  the  parties,  when  cir- 
cumstances come  to  his  knowledge  sufficient  to  put  him  upon  inquiry, 
is  chargeable  with  knowledge  of  all  the  facts  that  such  inquiry  would 
have  revealed.^  The  difficulty  in  this  case  is  to  find  the  circumstance 
which  can  be  said  to  be  sufficient  to  put  Brooks  upon  the  inquiry. 
There  was  absolutely  nothing  on  the  face  of  the  paper  except  the 
signature,  as  president,  of  the  party  who  was  dealing  with  it,  and 
that,  we  think,  was  not  sufficient  in  view  of  the  fact  that  the 
appearances  were  that  he  was  a  purchaser  from  a  third  party. 

The  principle  that  applies  in  a  case  where  an  officer  of  a  corporation 
makes  the  corporate  obligation  payable  to  himself,  and  then  attempts 
to  deal  with  it  for  his  own  benefit,  does  not  aid  in  solving  the  question 
in  this  case.  When  paper  of  that  character  is  presented  by  the 
officer  or  agent  of  the  corporation,  it  bears  upon  its  face  sufficient 
notice  of  the  incapacity  of  the  officer  or  agent  to  issue  it.  Hanover 
Bank  v.  Am.  Dock  &  T.  Co.,  148  N.  Y.  612 ;  Bank  of  N.  Y.,  etc.  v. 
Am.  Dock  &  T.  Co.,  143  N.  Y.  559 ;  Wilson  v.  M.  E.  E.  Co.,  120 
N.  Y.  145;  Gerona  v.  McCormick,  130  N.  Y.  261.  There  are  nu- 
merous cases  that  belong  to  that  class  cited  by  the  learned  counsel 
for  the  defendant  on  his  brief.  There  is  a  manifest  distinction 
between  them  and  the  case  at  bar.  Here  the  officer  was  not  dealing 
with  the  corporate  notes  payable  to  himself  but  with  notes  that  had 
been  regularly  issued,  so  far  as  appeared  from  their  face,  to  a 
stranger  and  by  him  transferred  to  a  firm  of  which  the  officer  was 
a  member  and  for  which  he  acted  as  agent  in  procuring  the  loan 
from  Brooks  and  pledging  them  as  security.  The  presence  of  Frost's 
name  upon  the  paper,  as  one  of  the  agents  who  issued  it,  was  not 
naturally  or  reasonably  calculated,  under  the  circumstances,  to  arouse 
suspicion  in  the  mind  of  Brooks,  or  to  lead  him  to  believe  that  the 
president  was  attempting  to  defraud  the  corporation  in  disposing 
of  the  notes.  None  of  the  cases  cited  by  the  learned  counsel  for  the 
defendant  sustain  the  proposition  that  such  a  circumstance  is  suffi- 
cient to  put  the  purchaser  of  negotiable  paper  upon  inquiry  or  charge 
him  with  knowledge  of  the  fact  in  case  he  fails  to  make  it,  and  there 
are  many  cases  that  tend  to  support  the  contrary  view.  Am.  Ex. 
Nat.  Bank  v.  N.  Y.  B.  &  P.  Co.,  148  N.  Y.  698 ;  Miller  v.  Consoli- 
dation Bank,  48  Penn.  St.  514;   Walker  v.  Kee,  14  S.  C.  142. 

*  See  explanation  of  this  language,  Bigelow,  Bills  and  Notes,  237. 


CHEEVER  V.   THE   PITTSBURGH,  ETC.   RAILROAD   CO.  403 

It  is  said  that  if  the  plaintiff's  right  to  recover  in  this  case  is 
sanctioned  by  this  court,  an  easy  way  will  be  opened  for  the  per- 
petration of  frauds  upon  corporations  by  officers  intrusted  with  its 
negotiable  obligations,  and  that  the  device  of  making  the  paper 
payable  to  the  order  of  a  nominal  payee,  interested  or  aiding  in  the 
fraud,  will  be  a  favorite  one  to  accomplish  the  end.  We  must  leave 
all  such  cases  to  be  dealt  with  upon  the  peculiar  facts  and  circum- 
stances as  they  arise.  It  is  more  reasonable  and  just  to  assume  that 
corporations  will  be  able  to  protect  themselves  by  proper  vigilance 
from  the  dishonesty  of  their  own  officers,  than  to  impute  to  parties 
who  have  taken  the  paper  for  value,  ignorant  of  its  origin,  construc- 
tive knowledge  of  the  facts  upon  such  circumstances  as  exist  in  this 
case. 

We  think  that  there  was  nothing  on  the  face  of  the  paper  or  in 
the  facts  shown  to  warrant  the  court  in  holding  as  matter  of  law,  as 
it  did,  that  the  obligations  were  received  by  Brooks  and  the  advances 
made  on  them  mala  fide.  That  is  the  effect  of  the  ruling  at  the 
trial,  and  the  conclusion  was  not  supported  by  the  facts. 

It  follows  that  the  judgment  must  be  reversed  and  a  new  trial 
granted,  costs  to  abide  the  event. 

Bartlett,  J.,  wrote  a  dissenting  opinion. 

Note.  —  Knowledge  of  facts  sufficient  to  charge  the  purchaser  with  notice 
of  any  defect,  is  here  spoken  of  in  the  sense  of  the  law  merchant :  "  The  rights 
of  the  holder  are  to  be  determined  by  the  simple  test  of  honesty  and  good 
faith  "  ;  but  facts  may  appear  upon  the  instrument  itself  which  will  fix  tb.e 
holder  with  notice  of  infirmities;  e.  g.  in  National  Bank  v.  Law  et  al.,  127 
Mass.  72,  Law  made  a  note  payable  to  the  order  of  P.  &  Co.,  a  copartnership 
of  which  he  was  a  member.  P.  &  Co.'s  name  was  indorsed  by  another  mem- 
ber of  that  firm,  and  above  this  indorsement  Law  wrote  the  name  of  S.  &  Co., 
another  partnership,  of  which  he  was  also  a  member.  The  plaintiff  purchased 
the  note  from  a  member  of  the  firm  of  P.  &  Co.  before  maturity  and  without 
knowledge  of  any  defect  in  the  instrument.  It  was  held  that  the  plaintiff  was 
charged  with  notice  that  the  firm  of  S.  &  Co.  was  an  accommodation  indorser, 
and  that  Law  had  no  implied  authority  to  sign  the  name  of  that  firm  for  such 
a  purpose ;  and  as  Law  bad  no  express  authority  so  to  sign,  S.  &  Co.  were  not 
liable  to  the  plaintiff. 

This  may  be  referred  to  the  same  test,  —  to  turn  aside  from  facts  such  aa 
here  appear,  is  bad  faith  in  the  sense  of  the  law  merchant. 


404  holder's  position. 

[Equities  are  defences  in  the  nature  of  cross-rights  of  action, 
wliich  admit  the  existence  of  a  contract,  but  which  render  the  con- 
tract defeasible  between  the  parties  thereto  and  all  others,  except 
bona  fide  holders,  or  those  who  stand  upon  the  rights  of  such 
holders.^] 

-f  PUTNAM   V.    SULLIVAN. 

Supreme  Court  of  Massachusetts,  March,  1808.     4  Mass.  45. 

Fraud  inducing  the  contract  is  au  equity,  and  is  not  available  as  a  defence  against  a 
bonajide  holder. 

Case  by  the  indorsees  against  the  indorsers  of  a  promissory  note, 
dated  December  1,  1804,  payable  to  the  defendants  or  their  order. 
The  action  was  tried  at  the  last  November  term,  before  Parker,  J., 
when  a  verdict  was  given  for  the  plaintiffs  for  the  amount  of  the 
note  and  interest,  subject  to  the  opinion  of  the  court,  whether,  upon 
the  facts  proved,  and  which  were  to  be  reported  by  the  judge,  the 
action  could  be  maintained.  If  the  court  should  be  of  that  opinion, 
judgment  to  be  entered  according  to  the  verdict,  with  additional  dam- 
ages for  interest  to  the  time  of  the  judgment ;  if  the  court  should  be 
of  a  different  opinion,  a  new  trial  to  be  granted. 

Those  facts  were  in  substance  that  the  note  was  payable  in  ninety 
days  from  the  date  with  grace;  that  the  plaintiffs  were  innocent 
iiidorsees,  having  received  the  note  indorsed  in  blank,  and  paid  a 
valuable  consideration  for  the  same.  The  handwriting  of  the  prom- 
isor and  indorsers  was  admitted,  the  latter  being  the  handwriting 
of  W.  B.  Sullivan,  a  partner  of  the  house  doing  business  under  the 
firm  of  Jno.  L.  Sullivan  &  Co.  The  note  being  lodged  in  the  Boston 
bank  for  collection,  notice  was  left  at  the  lodgings  of  the  promisor 
by  the  messenger  of  the  bank,  on  the  28th  of  February,  1805,  and  on 
the  3d  of  March  following  the  said  W.  B.  S.,  one  of  the  indors- 
ers, was  notified  that  the  note  was  unpaid.  It  was  also  in  evidence 
that  the  promisor  had  absconded  before  the  note  fell  due,  and  that 
this  fact  was  known  to  all  the  parties  at  the  time. 

One  of  the  defendants  being  abroad  in  Europe,  and  the  other, 
about  the  1st  of  December,  1804,  having  occasion  to  make  a  journey 
from  Boston  to  Philadelphia,  intrusted  with  an  apprentice  or  clerk 
of  the  house  a  number  of  papers,  on  which  one  of  the  house  had 
written  the  name  of  the  firm  in  blank,  some  to  be  used  as  notes  in- 
dorsed by  the  house,  and  others  as  notes  in  which  the  house  were  to 
be  promisors.  These  papers  were  intrusted  to  a  clerk  of  the  defend- 
ants, to  be  used  when  money  was  to  be  advanced  on  the  sale  of  goods 
by  the  house  on  commission,  or  to  renew  the  notes  of  the  house  when 
due  at  the  banks.  The  clerk  was  directed  to  be  careful  of  the  blanks 
1  Bigelow,  Bills  and  Notes,  232. 


PUTNAM  V.   SULLIVAN.  405 

left  with  him,  and  not  to  use  any  for  the  advance  of  money  on  the 
sale  of  goods  on  commission  without  consulting  a  brother  of  the 
partners.  He  was  further  directed  to  deliver  one  of  the  blanks  to 
the  promisor  upon  the  note  sued  in  this  action,  to  enable  him  to 
renew  a  note  signed  by  him  then  in  the  bank,  of  which  the  house  were 
indorsers,  and  for  which  he  had  requested  a  blanlc  to  be  left.  The 
promisor  called  on  the  clerk  for  the  blank  indorsement  left  for  him, 
and  one  was  delivered  to  him;  afterwards,  pretending  that  by  some 
mistake  it  had  become  useless  to  him,  and  feigning  to  burn,  in  the 
clerk's  presence,  the  name  of  the  firm  indorsed,  procured  another 
blank,  and  by  a  similar  pretension  and  contrivance  he  obtained  a 
third  and  a  fourth  blank  indorsement,  the  last  of  which  was  in  fact 
used  for  the  purpose,  for  which  the  house  had  directed  a  blank  in- 
dorsement to  be  given  him.  The  promisor  had  used  one  of  the  prior 
blank  indorsements  for  making  the  note  sued  in  this  action;  which 
had  been  negotiated,  with  the  indorsement  remaining  in  blank,  to  the 
plaintiffs. 

[Argument  reported.] 

Parsons,  C.  J.  [Question  of  want  of  demand  on  the  promisor  here 
considered,  the  court  holding  that  demand  was  not  necessary  to  hold 
the  indorsers,  the  promisor  having  absconded.^] 

The  second  objection  is,  that  the  defendants  did  not,  in  construc- 
tion of  law,  indorse  this  note. 

On  the  facts  in  this  case  we  are  to  decide  who  shall  suffer  the  loss 
of  the  money,  —  the  plaintiffs,  who,  it  is  agreed,  are  innocent  in- 
dorsees, or  the  defendants. 

It  is  objected  that  this  note  ought  to  be  considered  as  a  forgery 
of  the  names  of  the  indorsers ;  because  a  note  was  afterwards  written  9 

on  the  face  of  the  paper  by  the  promisor,  not  only  without  the  direc- 
tion or  consent  of  the  defendants,  but  against  their  express  instruc- 
tion; and  therefore  that  it  was  a  false  and  fraudulent  alteration  of 
a  writing,  to  the  prejudice  of  the  indorsers. 

This  objection  would  have  great  weight,  if,  when  the  indorsers  put 
the  name  of  the  firm  on  the  paper,  they  had  not  intended  that  some- 
thing should  afterwards  be  written,  to  which  the  name  should  apply 
as  an  indorsement;  for  then  the  paper  would  have  been  delivered 
over  unaccompanied  by  any  trust  or  confidence.  If  the  clerk  had 
fraudulently,  and  for  his  own  benefit,  made  use  of  all  the  indorse- 
ments for  making  promissory  notes  to  charge  the  indorsers,  we  are 
of  opinion  that  this  use,  though  a  gross  fraud,  would  not  be  in  law 
a  forgery,  but  a  breach  of  trust.  And  for  the  same  reason,  when  one 
of  these  indorsements  was  delivered  by  the  clerk,  who  had  the  cus- 
tody of  them,  to  the  promisor,  who  by  false  pretences  had  obtained  it, 

1  See  ante,  pp.  302,  304. 


406  holder's  position. 

the  fraudulent  use  of  it  would  not  be  a  forgery;  because  it  was  de- 
livered with  the  intention  that  a  note  should  be  written  on  the  face 
of  the  paper  by  the  promisor,  for  the  purpose  of  negotiating  it  as 
indorsed  in  blank  by  the  house.  And  we  must  consider  a  delivery 
by  the  clerk,  who  was  intrusted  with  a  power  of  using  these  indorse- 
ments, (although  his  discretion  was  confined),  as  a  delivery  by  one 
of  the  house ;  whether  he  was  deceived,  as  in  the  present  case,  or  had 
voluntarily  exceeded  his  direction.  For  the  limitation  imposed  on 
his  discretion  was  not  known  to  any  but  to  himself  and  to  his 
principals. 

It  is  further  objected  that,  if  the  writing  of  this  note  under  these 
circumstances  is  not  a  forgery,  yet  it  is  such  a  fraud  as  will  discharge 
indorsers  against  an  innocent  indorsee.  The  counsel  for  the  defend- 
ants agree  that  generally  an  indorsement  obtained  by  fraud  shall  hold 
the  indorsers  according  to  the  terms  of  it;  but  they  make  a  distinc- 
tion between  the  cases  where  the  indorser,  through  fraudulent  pre- 
tences, has  been  induced  to  indorse  the  note  he  is  called  on  to  pay, 
and  where  he  never  intended  to  indorse  a  note  of  this  description,  but 
a  different  note,  and  for  a  different  purpose. 

Perhaps  there  may  be  cases  in  which  this  distinction  ought  to 
prevail ;  as  if  a  blind  man  had  a  note  falsely  and  fraudulently  read 
to  him,  and  he  indorsed  it,  supposing  it  to  be  the  note  read  to  him.* 
But  we  are  satisfied  that  an  indorser  cannot  avail  himself  of  this 
distinction,  but  in  cases  where  he  is  not  chargeable  with  any  laches 
or  neglect,  or  misplaced  confidence  in  others.  Here  one  of  two  inno- 
cent parties  must  suffer.  The  indorsees  confided  in  the  signature  of 
the  defendants,  and  they  could  have  no  reason  to  suppose  that  it  had 
been  improperly  obtained.  The  note  was  openly  offered  to  the  plain- 
tiffs by  a  broker,  and  when  they  objected  on  account  of  the  absence  of 
both  the  indorsers,  they  were  answered,  on  the  information  of  the 
promisor,  whose  character  then  stood  fair,  that  blank  indorsements 
had  been  left  with  the  clerk,  and  that  the  indorsers  had  before  in- 
dorsed a  number  of  notes  for  the  same  person,  which  had  been  nego- 
tiated by  a  broker.  On  the  other  hand,  the  loss  has  been  occasioned 
by  the  misplaced  confidence  of  the  indorsers  in  a  clerk  too  young 
or  too  unexperienced  to  guard  against  the  arts  of  the  promisor.  It 
is  to  be  regretted  that  the  blank  indorsements  had  not  been  depos- 
ited with  the  brother  of  the  partners,  who  was  directed  to  be  con- 
sulted as  to  the  use  of  them ;  for  then  no  innocent  person  would  have 
been  a  sufferer. 

From  a  view  of  all  the  facts,  as  they  are  presented  to  us,  it  is  our 
opinion  that  the  indorsers  must  be  holden,  and  that  judgment  must 
be  entered  according  to  the  verdict,  with  the  additional  interest 
agreed. 

In  forming  this  opinion,  we  have  been  necessarily  led  to  consider 
1  See  ante,  p.  360. 


CLARK  V.   PEASE.  407 

the  effect  of  a  different  opinion  on  the  commercial  part  of  the  com- 
munity. How  far  it  is  common  for  merchants  to  intrust  their  clerks 
with  blank  signatures  or  indorsements,  is  not  known.  But  when  mer- 
chants are  in  the  habit  of  indorsing  for  each  other  at  the  banks,  it  is 
very  common  to  put  their  names  on  blank  paper,  and  deliver  them  to 
the  party  to  be  accommodated,  for  the  express  purpose  of  obtaining 
a  renewal  of  certain  notes,  when  they  become  due.  And  if  the  party 
having  these  signatures  should  employ  them  as  names  to  other  nego- 
tiable securities  not  contemplated,  and  the  signatures  should  for  that 
reason  be  void,  much  injury  might  result  to  innocent  indorsers,  or  the 
bank  discounts  would  be  greatly  embarrassed. 


CLARK   V.   PEASE. 
Supreme  Court  of  New  Hampshire,  December,  1860.    41  N.  H,  414. 
So,  too,  of  duress. 

This  is  an  action  of  assumpsit  counting  upon  the  promissory  note 
of  the  three  defendants,  dated  July  26,  1858,  for  $112.50,  payable 
to  one  Theodore  P.  Clark,  or  order,  on  the  first  day  of  the  following 
November,  and  by  the  payee  indorsed  and  delivered,  on  the  day  of 
its  date,  to  the  plaintiff.  There  was  also  a  count  for  money  had  and 
received,  to  the  amount  of  $300.    Plea,  the  general  issue. 

The  defendants  offered  to  prove  that  on  the  day  before  the  giving 
of  the  note,  all  of  the  makers  except  Charles  Pease  were  arrested  at 
Ellsworth,  in  Grafton  County,  by  Calvin  Clark,  a  deputy  sheriff,  by 
the  procurement  and  with  the  aid  of  the  payee,  and  held  by  them  in 
custody  until  the  next  day,  when  they  were  carried  by  them  to  Ply- 
mouth, and  were  held  in  custody  until,  to  effect  their  liberation,  this 
note  was  given,  the  said  Charles  Pease  signing  as  the  surety  of  the 
others ;  that  the  arrest  was  made  without  any  warrant  or  other  law- 
ful authority;  but  it  was  represented  by  the  sheriff  that  they  were 
arrested  for  the  criminal  offence  of  malicious  mischief,  and  that  he 
had  the  right  to  arrest  them  without  a  warrant ;  that  this  note,  with 
two  others,  amounting  in  all  to  $250,  was  given  to  said  Theodore  P. 
Clark  to  obtain  the  release  from  duress  of  the  three  principals  in  the 
note,  and  upon  the  promise  by  the  payee  that  they  should  then  be  set 
at  liberty,  and  he  would  prosecute  them  no  further;  and  upon  the 
execution  of  the  note  they  were  set  at  liberty  accordingly. 

The  plaintiff  excepted  to  this  evidence,  as  no  defence  against  the 
indorsee,  without  proof  that  he  was  not  the  bona  fide  holder  of  the 
note.  But  the  court  ruled  that  if  the  note  was  obtained  by  duress,  it 
was  void  in  the  hands  of  an  innocent  indorsee,  and  thereupon  the 
plaintiff,  admitting  for  the  purposes  of  this  trial  that  the  defendants' 


408  holder's  posiTioif. 

witnesses  would  testify  to  the  facts  stated,  a  verdict  for  the  defend- 
ants was  taken  by  consent,  subject  to  the  opinion  of  the  court;  and 
the  questions  thus  raised  were  reserved,  and  assigned  to  the  deter- 
mination of  the  whole  court. 

[Argument  reported.] 

Sargent,  J.  That  the  case  presented  is  clearly  one  of  duress, 
there  can  be  no  question.  The  abuse  of  any  process,  either  civil  or 
criminal,  to  compel  a  party,  by  imprisonment,  to  do  any  act  against 
his  will  except  to  pay  the  debt  for  which  he  is  arrested,  is  entirely 
illegal,  and  the  act  may  be  avoided  on  the  ground  of  duress.  Eich- 
ardson  v.  Duncan,  3  N.  H.  508 ;  Severance  v.  Kimball,  8  N.  H.  386 ; 
Shaw  V.  Spooner,  9  N.  H.  197;  Bumham  v.  Spooner,  10  N.  H.  523; 
Breck  v.  Blanchard,  22  N.  H.  303.  Here  the  arrest  was  without  any 
warrant  or  lawful  authority.  Such  duress  is  a  perfect  defence,  upon 
all  the  authorities,  to  an  action  between  the  original  parties. 

The  note  in  this  case  was  not  only  void  as  between  the  original 
parties,  on  the  ground  of  duress,  but  was  given  to  compromise  a 
charge  of  crime,  and  was  wholly  illegal  upon  that  ground.  Plumer 
V.  Smith,  5  N.  H.  553.  But  the  principal  question  raised  here  by  the 
ruling  of  the  court  is,  whether  such  a  note  is  absolutely  void  in  the 
hands  of  any  holder;  and  if  not,  then  another  question  arises  upon 
the  exception  which  was  taken  by  the  plaintiff,  which  is  this ;  after  an 
indorsee  has  made  out  a  prima  facie  case  by  proving  the  indorsement, 
etc.,  and  the  defendant  has  shown  that  the  note  was  obtained  from 
him  by  duress,  upon  whom  rests  the  burden  of  proof  ?  Must  the  de- 
fendant prove  that  the  plaintiff  was  not  the  ho7ia  fide  holder,  and  that 
he  did  not  pay  a  valid  consideration  for  it,  as  the  plaintiff  claimed? 
or,  the  duress  being  proved,  does  that  throw  the  burden  of  proof  upon 
the  plaintiff,  to  prove  how  he  came  by  the  note,  and  the  consideration 
he  paid,  etc.,  as  the  defendant  claims?  We  will  examine  these  ques- 
tions in  the  order  in  which  we  have  stated  them. 

I.  Is  this  note  absolutely  void  in  the  hands  of  any  holder,  however 
innocent,  who  has  paid  a  valid  consideration  for  it  before  it  was  due. 

We  find  that  the  law  holds  certain  persons  to  be  incompetent 
parties  to  make  contracts,  on  account  of  want  of  capacity.  It  has, 
therefore,  wisely  taken  care  of  the  interests  of  those  who  either  have 
not  judgment  to  contract,  as  in  the  case  of  infants,  or  who,  having 
judgment  to  contract,  cannot  in  law  have  any  funds  or  property  to 
enable  them  to  perform  the  contract,  as  in  the  case  of  a  feme  covert; 
and  therefore  it  has  in  general  rendered  the  contracts  of  infants 
voidable,  and  those  of  married  women  absolutely  void.^  Ch.  on  Bills, 
18.  By  our  law  an  infant  has  not  capacity  to  bind  himself  absolutely 
by  a  promissory  note,  as  maker  or  indorser.    Story,  Prom.  Notes,  sec. 

1  But  see  Key.  Laws  of  Mass.,  ch.  153,  §  2. 


CLARK   V.   PEASE.  409 

78,  So  a  married  woman  is  incapable,  in  any  case,  of  becoming  a 
party  to  a  note  or  bill  so  as  to  charge  herself  with  any  obligation 
whatever,  ordinarily  arising  therefrom.  So  contracts  made  with  an 
alien  enemy  are  absolutely  void,  upon  the  ground  of  disability  to 
contract.  This  principle  has  its  origin  and  confirmation  in  the  law 
of  nations.  Persons  insane,  or  imbecile  in  mind,  have  not  the  mental 
capacity  to  contract.  This  disability  flows  from  the  most  obvious 
principles  of  natural  justice,  because  persons  in  that  condition, — 
lunatics,  idiots,  and  persons  non  compos  mentis,  —  being  bereft  of 
their  reason,  are,  by  the  rules  not  only  of  municipal  law  but  of  uni- 
versal justice,  held  to  be  utterly  incapable  of  making  contracts,  and 
generally  their  contracts  are  absolutely  void.^  Story,  Prom.  Notes, 
sees.  85,  94,  100,  101 ;  Edwards,  Bills  and  Notes,  ch.  2.  There  are 
some  other  parties  that  are  held  to  be  incompetent  to  contract,  but 
these  are  the  principal;  and  there  are  also  some  exceptions  to  some 
or  all  of  the  general  rules  above  stated,  which  are  not  now  impor- 
tant to  be  noticed.  These  doctrines  are  all  familiar  as  elementary 
principles. 

Contracts,  therefore,  purporting  to  be  entered  into  by  either  of  the 
above  parties,  are  either  void,  or  voidable,  as  the  case  may  be,  alike 
as  against  the  other  party  to  the  original  contract,  and  also,  where  the 
contract  is  assignable,  they  are  void  as  to  such  incompetent  parties, 
or  are  voidable  by  them,  in  the  hands  of  any  assignee  or  indorsee. 
These  rules  of  law  are  founded  upon  the  most  common  principles  of 
natural  justice  and  of  public  policy. 

There  are  numerous  other  contracts,  which,  though  made  between 
competent  parties  on  both  sides,  are  nevertheless  void  as  between  such 
original  parties.  A  contract  made  on  Sunday,  where  the  transaction 
of  such  business  is  prohibited,  is  an  illegal  contract,  and  void  as 
between  the  parties.  So  a  contract  based  upon  an  illegal  considera- 
tion, as  usury,  gaming,  spirituous  liquors  sold  without  license  con- 
trary to  law,  the  compounding  of  a  felony,  etc,  is  void  as  between 
the  parties.  So  a  contract  without  consideration,  nudum  pactum, 
and  one  where  the  consideration  has  failed,  as  between  the  immediate 
parties,  is  void  or  voidable.  So  a  contract  entered  into  by  compul- 
sion under  duress,  or  obtained  by  fraud,  or  circumvention  of  one  in 
a  state  of  intoxication,  is  void  as  between  the  parties.  Other  cases 
might  be  stated  (see  Ch.  on  Bills,  82-87),  but  these  are  sufficient  for 
our  present  purpose.  "Where  the  contract  itself  is  illegal,  or  is 
founded  upon  an  illegal  consideration,  the  parties  are  usually  both 
violators  of  the  law,  and  stand  in  pari  delicto.  In  such  case,  any 
contract  for  the  payment  of  money  or  the  performance  of  any  service 
cannot  be  enforced  as  between  the  parties;  nor,  if  money  has  been 
paid  or  property  transferred  by  one  party  to  the  other  under  such 
contract,  where  both  parties  are  alike  in  fault,  can  it  be  recovered 

1  Bnt  cf.  Carrier  v.  Sears,  4  Allen,  336. 


410  holder's  position. 

back,  because  in  such  cases,  "Potior  est  conditio  possidentis."  But 
in  cases  of  duress,  fraud,  or  circumvention,  the  fault  was  all  upon  one 
side,  and  the  innocent  party,  upon  whom  the  duress  or  the  fraud  was 
practised,  may  not  only  avoid  the  contract  entered  into  under  these 
circumstances,  but  if  he  pay  money,  or  deliver  property,  he  may 
recover  it  back  again.  Now  bills  and  notes  stand  upon  the  same 
foundation  as  all  other  contracts  do,  in  all  the  above  respects,  so  long 
as  they  remain  in  the  hands  of  the  original  payee.  But  bills  and 
notes  have  another  attribute,  which  other  contracts  ordinarily  do  not 
possess,  —  that  is,  negotiability.  Where  a  bill  or  note  has  been  nego- 
tiated, and  passed  into  the  hands  of  a  hotia  fide  holder  before  it  is 
due,  and  for  a  valuable  consideration,  in  such  case  the  holder  acquires 
rights  which  did  not  belong  to  the  payee.  He  stands  in  a  different 
relation  to  the  promisor.  These  additional  rights  and  privileges 
have  been  conferred  upon  such  holder  by  law,  for  good  and  sufficient 
reasons,  too  well  known  and  understood  to  need  to  be  stated,  but 
which  are  incident  to  and  dependent  upon  the  attribute  of  negotia- 
bility, which  these  instruments  possess. 

It  may  be  laid  do'mi  as  the  general  rule,  as  the  general  principle 
applying  to  this  class  of  cases,  that  such  a  note,  thus  negotiated,  and 
in  the  hands  of  such  a  holder,  is  not  liable  to  any  defence  which  the 
maker  had  as  against  the  original  payee.  To  this  general  rule  there 
are  some  exceptions,  among  which  are : 

1.  When  a  statute  not  only  prohibits  the  making  of  a  contract,  but 
provides  that  the  same  shall  be  void  to  all  intents  and  purposes;  or 
where  the  law  provides  that  any  contract  made  or  securities  given 
upon  any  illegal  consideration  shall  be  absolutely  void,  then  the  note 
which  embodies  such  contract,  or  is  based  upon  such  consideration, 
is  held  void  everywhere  and  in  the  hands  of  every  holder.  In  Eng- 
land, and  in  most  of  the  United  States,  there  are  or  have  been  laws 
against  usury,  which  not  only,  by  a  general  prohibition  of  usury, 
made  that  an  illegal  consideration  for  a  note,  but  also  provided  that 
all  bills  or  notes  founded  upon  such  a  consideration  should  be  abso- 
lutely void.  Such,  however,  is  not  the  law  in  this  State  on  that 
subject,  and  it  is  believed  that  we  have  no  statutes  with  similar 
provisions.  Hence,  here  usury  may  be  a  good  defence  to  a  note  as 
against  the  original  party,  but  not  as  against  an  innocent  indorsee, 
for  value,  etc. 

2.  \^Tiere  the  note  is  a  forgery,  it  is  void  everywhere. 

3.  When  the  maker  belongs  to  a  class  of  persons  who  are  ordinarily, 
and,  as  a  general  rule,  on  grounds  of  public  policy,  held  incompetent 
to  contract  at  all,  such  as  infants,  married  women,  alien  enemies,  and 
insane  persons,  including  spendthrifts,  and  others  under  guardian- 
ship, who  have  been  by  some  statute  declared  incompetent  to  contract. 

4.  Notes  signed  by  agents  without  authority. 

In  none  of  these  cases  (except  the  first,  which,  as  we  have  seen, 


CLARK   V.   PEASE.  411 

does  not  apply  in  this  State)  is  a  note  valid  in  the  hands  of  any  one; 
and  the  party  who  discounts  such  paper  is  bound  to  inquire,  at  his 
peril,  whether  the  note  offered  to  him  is  signed  by  a  party  capable 
and  competent  in  law  to  bind  himself,  or  by  an  agent  duly  author- 
ized to  bind  his  principal.  Beside  this,  he  is  bound  to  inquire 
whether  the  party  from  whom  he  receives  it  is  competent  to  make 
such  transfer  in  his  own  right,  or  is  authorized  to  do  it  for  his  prin- 
cipal, for  whom  he  assumes  to  act. 

If  there  is  a  failure  in  either  of  these  points  of  capacity  or  author- 
ity, it  will  not  avail  the  party  that  he  is  a  bona  fide  holder,  for  value, 
without  notice.  He  must  look  to  his  indorser  if  he  has  one,  and  if 
he  has  not  he  must  suffer  loss. 

5.  Another  case  might  be  mentioned,  which  has  been  made  an 
exception  to  the  general  rule  above  stated  by  express  provisions  of 
the  statute,  —  as  where  a  note  is  attached  by  the  trustee  process. 
There,  by  operation  of  the  statute,  the  maker  of  a  note  may  have  a 
perfect  defence  against  an  indorsee,  for  value,  without  notice,  and 
before  due.  So  notes  discharged  by  operation  of  insolvent  laws  might 
afterward  be  transferred,  by  possibility,  so  as  to  form  another  excep- 
tion, where  the  indorsee,  holding  the  note  bona  fide,  etc.,  might  be 
met  with  a  perfect  defence  on  the  part  of  the  maker.  But  these  last 
cases  throw  no  light  upon  the  question  we  are  considering.  These 
are  the  principal,  perhaps  all  the  exceptions  to  the  general  rule  above 
stated,  that  no  defence  is  available  against  an  innocent  indorsee,  for 
value  paid  before  due.  But  where  the  contract  was  illegal,  as  usury, 
wagers,  compounding  a  felony,  restraint  of  trade  or  of  marriage,  etc., 
or  where  there  was  a  want  or  failure  of  consideration,  and  even 
where  the  note  has  been  paid,  —  all  these  defences,  and  many  more, 
cannot  be  made  against  the  note  in  the  hands  of  such  a  holder.  And 
the  question  here  raised  is,  whether,  in  case  of  duress,  or  fraud, 
where  there  is  mala  fides,  but  it  is  all  on  one  side,  and  the  other  party 
to  the  note  has  been  induced  to  sign  it  by  force  or  by  fraud,  and  is 
in  every  respect  an  innocent  party,  such  defence  shall  avail  him  as 
against  such  a  holder,  for  value,  etc.,  who  seeks  to  collect  it. 

And  we  think  such  a  defence  cannot  avail  the  maker  against  such 
an  indorsee  of  the  note.  The  authorities  favor  this  view.  Kent,  in 
his  Commentaries,  vol.  2,  sec.  39,  speaks  of  contract  generally,  and 
on  page  453  says,  "  If  a  contract  be  entered  into  by  means  of  violence 
offered  to  the  will,  or  under  the  influence  of  undue  constraint,  the 
party  may  avoid  it  by  plea  of  duress ;  and  it  is  requisite  to  the  valid- 
ity of  every  agreement  that  it  be  the  result  of  a  free  and  bona  fide 
exercise  of  the  will.  Nor  will  a  contract  be  valid  if  obtained  by 
misrepresentation  or  concealment,"  etc. 

He  here  speaks,  evidently,  of  the  contract  as  between  the  original 
parties  to  it,  or  of  contracts  in  general  as  distinguished  from  negoti- 
able notes  and  bills;   because  he  devotes  another  chapter  especially 


412  IIOLDEU'S   POSITION. 

to  a  consideration  of  bills  and  notes,  in  which  he  says,  in  speaking 
of  the  right  of  the  holder  (vol.  3,  pages  79,  80),  that  a  bona  fide 
holder  can  recover  upon  such  note,  though  it  came  to  him  from  a 
person  who  had  stolen  or  robbed  it  from  the  true  owner,  provided  he 
took  it  innocently  in  the  course  of  trade,  for  a  valuable  consideration, 
and  under  circumstances  of  due  caution;  and  he  need  not  account 
for  his  possession  of  it  unless  suspicion  be  raised.  This  doctrine  is 
founded  on  the  commercial  policy  of  sustaining  the  credit  and  circu- 
lation of  negotiable  paper.  Suspicion  must  be  cast  upon  the  title  of 
the  holder  by  showing  that  the  instrument  had  got  into  circulation 
by  force  or  fraud,  before  the  onus  is  cast  upon  the  holder  of  showing 
the  consideration  he  gave  for  it. 

Chitty  says  (Ch.  on  Bills,  72),  "In  general  there  will  be  a  suffi- 
cient defence  between  the  original  parties  when  the  bill  or  note  was 
obtained  by  duress  or  by  fraud,  or  by  circumvention,"  etc.  But  he 
no  where  intimates  that  any  of  these  defences  would  be  good  against 
an  innocent  indorsee;  but,  on  the  contrar}%  he  expressly  says  (page 
79),  "  The  circumstance  of  a  bill  or  note  having  been  obtained  with- 
out adequate  consideration,  or  even  by  duress  or  fraud,  or  misapplied 
by  an  agent  to  his  own  use,  affords  no  defence  where  the  instrument 
comes  into  the  possession  of  a  bona  fide  holder,  for  value,  without 
notice,  and  before  it  is  due." 

In  Doe  V.  Burnham,  31  N.  H.  431,  the  rule  is  laid  down  very 
broadly,  and  without  those  qualifications  and  exceptions  which  we 
have  heretofore  seen  must  necessarily  always  accompany  it.  East- 
man, J.,  delivering  the  opinion  in  that  case,  says  that  where  a  note 
is  indorsed  in  the  usual  and  ordinary  course  of  commercial  business, 
all  the  authorities  "  sustain  the  broad  rule  that  a  ho7ia  fide  holder 
for  a  valuable  consideration,  who  becomes  such  before  the  dishonor 
of  the  note,  takes  it  free  from  all  defences  between  prior  parties"; 
and  see  cases  there  cited.  He  also  quotes  Shaw,  C.  J.,  in  Wheeler  v. 
Guild,  20  Pick.  545,^  as  stating  the  rule  in  Massachusetts  substan- 
tially in  the  same  way,  and  then  adds :  "  We  are  not  aware  that  in 
this  State  there  is  any  exception  to  the  universality  of  the  rule." 

Now  this  rule,  in  the  general  and  broad  terms  in  which  it  is  laid 
down,  is  at  once  seen  to  be  incorrect,  because  in  case  of  notes  forged, 
or  signed  by  an  agent  having  no  authority,  or  by  an  infant,  a  mar- 
ried woman,  an  alien  enemy  in  time  of  war,  or  an  insane  person, 
exceptions  to  this  rule  have  been  seen  to  exist  necessarily.  But  if 
the  intention  was  merely  to  state  a  general  rule,  subject  to  such  limi- 
tations and  exceptions  as  general  rules  are  usually  subject  to,  it  is 
undoubtedly  correct;  and  in  that  view  it  is  broad  enough  to  cover 
our  present  case,  because  in  this  case  the  signature  to  the  note  is 
genuine,  and  no  forgery.    N"o  question  of  agency  or  authority  arises, 

1  Post,  p.  461. 


CLAKK   V.   PEASE.  413 

nor  does  the  signer  belong  to  either  of  the  classes  whom  the  law  holds 
incompetent  to  contract. 

Suppose  an  individual,  then,  were  about  to  purchase  a  note  pay- 
able to  bearer,  before  it  was  due,  and  pay  a  fair  equivalent  for  it, 
with  a  view  of  collecting  it  of  the  maker,  and  where  he  is  to  have  no 
indorser  to  rely  upon,  —  what  would  be  his  duty  in  order  to  proceed 
safely?  First,  he  must  assure  himself  of  the  genuineness  of  the  sig- 
nature, or  if  it  purported  to  be  signed  by  an  agent,  he  must  assure 
himself  that  the  agent  was  duly  authorized  to  bind  his  principal  in 
that  particular;  secondly,  he  must  make  such  inquiries,  which,  ordi- 
narily, he  may  easily  do,  as  to  ascertain  that  the  signer  is  not  an 
infant,  a  married  woman,  an  alien  enemy,  an  insane  person,  etc.,  — 
that  he  does  not  belong  to  a  class  of  persons  who  are  always  presumed 
by  the  law  to  be  incompetent  to  contract ;  and  thirdly,  he  might  need, 
for  his  own  safety,  to  inquire  whether  the  signer  of  the  note  had  been 
trusteed,  or  whether  any  other  special  statute  could  affect  his  claim 
to  it.  When  he  has  satisfied  himself  upon  these  points,  if  he  learns 
of  no  other  defects,  and  the  signer  is  of  sufficient  ability  to  respond, 
he  may  purchase ;  and  there  is  generally  very  little  trouble  in  ascer- 
taining these  facts.  They  are  usually  matters  of  public  notoriety, 
about  which  there  can  be  little  room  for  mistake. 

But,  suppose  that  after  being  satisfied  upon  all  these  points,  and 
having  purchased  the  note,  it  should  prove  that  it  was  an  illegal 
contract,  or  was  for  an  illegal  consideration,  —  who  shall  suffer  ?  the 
maker,  or  the  indorsee?  This  is  settled  on  the  best  of  authority. 
The  original  parties  stood  upon  equal  ground,  both  being  in  fault, 
and  could  neither  of  them  enforce  the  contract;  yet  neither  shall  be 
allowed  to  take  advantage  of  his  own  wrong  as  against  an  innocent 
indorsee. 

And  suppose  it  should  turn  out  that  his  note  was  obtained  of  the 
maker  by  fraud  or  by  duress,  a  case  in  which  the  maker  was  in  no 
fault,  —  what  rule  shall  be  applied  here  ?  —  the  long-established  one, 
that  where  one  of  two  innocent  persons  must  suffer,  the  loss  should 
fall  upon  him  who  has  suffered  a  negotiable  security,  with  his  name 
attached  to  it,  to  get  into  circulation,  and  thereby  mislead  the  in- 
dorsee. Such  rules,  and  such  an  application  of  them,  are  necessary 
to  give  security  to  negotiable  paper. 

The  defendant's  counsel  claim  that  the  same  rule  that  would  hold 
the  maker  of  a  note,  who  signed  it  under  duress,  to  pay  it  to  the 
innocent  holder,  for  value,  would  hold  infants,  and  others  who  are 
incompetent  to  contract,  to  pay  their  notes  when  thus  held;  but 
this  is  neither  a  legal  nor  a  logical  sequence.  The  infant  belongs 
to  a  class,  all  of  whom  are  held  by  law  to  be  incompetent  to  bind 
themselves  by  their  contracts.  In  the  other  case,  the  man  belonirs  to 
a  class  amply  competent  to  contract;  is  under  no  general  disability 
as  the  infant  is;    is  never  to  be  presumed  to  have  signed  any  note 


414  holder's  position. 

under  duress,  because  that  is  a  condition  never  to  be  pi'esumed  in 
case  of  a  free  man,  who  may  have  signed  a  thousand  notes  and 
never  have  signed  but  this  one  under  duress.  Is  suspicion  to  be  cast 
upon  all  notes  that  are  known  to  be  properly  signed,  and  against  men 
under  no  disability,  simply  because  it  is  possible  that  such  a  note 
may  be  obtained  by  duress  or  fraud? 

Take  also  the  case  of  a  slave.  There  the  general  rule  is,  that  he 
is  incompetent  to  contract;  and  if  a  man  were  about  to  purchase 
a  note,  and,  upon  inquiry  as  to  who  the  signer  was,  should  learn  that 
he  was  a  slave,  that  would  be  sufficient  notice  to  him  that  the  note 
was  void,  because  all  contracts  made  by  all  slaves  usually  are  so, 
because,  while  in  that  condition  they  must  necessarily  be  constantly 
under  duress  of  body,  mind,  and  will.  But  when  it  is  ascertained 
that  the  signer  is  a  free  man,  then  the  presumption  is  that  he  is  never 
under  duress,  and  there  are  only  rare  exceptions  to  this  general  rule ; 
and  to  say  that  in  such  exceptional  cases  the  maker  shall  be  allowed 
to  stand  upon  such  a  defence  against  an  innocent  holder  for  value, 
taking  it  in  the  ordinary  course  of  mercantile  business  before  the 
maturity  of  the  note,  would  be  to  overthrow  all  confidence  in  nego- 
tiable paper,  and  entirely  reverse  the  policy  of  the  whole  system  of 
mercantile  law.  The  exception  to  the  ruling  of  the  court  upon  this 
point  must  be  sustained ;  but  we  shall  find  that  the  numerous  author- 
ities which  bear  upon  the  next  question  to  be  considered,  have  also 
a  direct  bearing  upon  this  point.  .iL. 

II.  [A  question  of  the  burden  of  proof.  See  Paton  v.  Coit,  post, 
p.  457.] 

A  new  trial  granted. 


SONDHEIM   V.    GILBERT. 

Supreme  Court  of  Indiana,  November,  1888.    117  Ind.  71 ;  18  N.  E.  Rep.  687. 

So  of  illegality  at  the  common  law  or  by  statute,  except  where  the  statute  makes 
the  contract  absolutely  void. 

Action  by  the  holders  against  the  makers  of  a  promissory  note. 
The  facts  are  stated  in  the  opinion. 

[Argument  not  reported.] 

^Mitchell,  J.  This  was  a  suit  by  Samuel  and  Henry  P.  Sondlieim, 
partners  doing  business  under  the  firm  name  of  Sondheim  Brothers, 
against  John  Gilbert,  assignee  of  Miller  Brothers,  insolvents,  to 
establish  a  claim  against  the  partnership  estate  of  the  latter  in  the 
hands  of  the  assignee. 


SONDHEIM  V.   GILBERT.  415 

It  is  averred  in  the  complaint  that  Conrad  and  Jacob  Miller  had 
theretofore  been  partners  doing  a  general  mercantile  business  in  the 
city  of  Evansville,  under  the  firm  name  of  Miller  Brothers,  and  that, 
on  the  11th  day  of  December,  1885,  they  executed  their  promissory 
note,  payable  to  themselves  in  six  months  after  date,  in  the  city  of 
New  York,  for  $7264.11.  It  is  averred  that  Miller  Brothers  after- 
wards negotiated  the  note  by  indorsement  in  blank,  and  that  after 
it  passed  through  the  hands  of  divers  persons,  the  plaintiffs  became 
the  owners  of  the  note  before  its  maturity,  having  paid  therefor  the 
full  face  value,  without  any  notice  whatever  of  the  consideration  for 
which  it  was  given.  The  law  of  the  State  of  New  York,  the  note 
having  been  executed  and  made  payable  in  that  State,  is  set  out 
in  the  complaint,  and  it  appears  therefrom  that  notes,  drawn  in 
the  form  of  that  sued  on,  are  negotiable  according  to  the  custom 
and  law  of  merchants. 

The  case  was  disposed  of  in  the  court  below  by  a  ruling  on  a 
separate  demurrer  to  certain  answers,  which  set  up  substantially 
the  following  facts,  viz.,  that  at  the  date  of  the  execution  of  the 
note,  the  Miller  Brothers  were  engaged  in  the  dry  goods  business 
in  the  city  of  Evansville,  and  that  Conrad  Miller,  one  of  the  mem- 
bers of  the  firm,  made  an  agreement  with  Morris  Ranger,  without 
the  knowledge  or  consent  of  Jacob  Miller,  the  other  member  of  the 
firm,  that  they.  Hanger  and  Conrad  Miller,  should  engage  on  joint 
account  in  speculating  in  cotton  futures  upon  the  New  York  cotton 
exchange;  that  they  agreed  to  buy,  on  joint  account,  fifty  thousand 
bales  of  cotton  to  be  nominally  delivered  during  some  months  in  the 
future;  and  that  it  was  understood  and  agreed  between  them  that 
no  cotton  was  to  be  actually  bought,  sold,  received  or  delivered,  but 
that,  after  making  pretended  purchases,  if  the  price  should  advance 
or  decline  on  the  New  York  cotton  exchange,  there  was  to  be  a  settle- 
ment of  the  differences  accordingly,  as  the  current  price  might  be 
higher  or  lower  than  that  nominally  agreed  upon  at  the  time  of  the 
pretended  purchase. 

It  is  averred  that,  in  pursuance  of  the  foregoing  arrangement, 
Conrad  Miller  executed  the  note  sued  on,  together  with  a  large 
number  of  other  notes,  without  the  knowledge  or  consent  of  his 
partner,  and  that  the  notes  so  executed  were  indorsed  in  blank  by 
Conrad  Miller,  in  the  name  of  Miller  Brothers,  and  placed  in  the 
hands  of  Ranger,  to  be  used  by  him  solely  for  the  purpose  of  paying 
or  securing  losses  or  margins  which  were  required  to  be  put  up  in 
the  contemplated  transactions,  which  it  is  alleged  wera  to  be  merely 
gambling  or  wagering  speculations  in  cotton  futures,  and  that  the 
note  sued  on  was  made  and  indorsed  for  no  other  consideration 
whatever. 

In  some  of  the  paragraphs  of  answer  which  set  up  substantially 
the  foregoing  facts,  certain  sections  of  a  statute  against  gaming,  and 


416  holder's  position. 

affecting  certain  contracts  and  securities,  alleged  to  be  in  force  in 
the  State  of  New  York,  are  set  out. 

The  court  overruled  the  demurrer  to  the  answers,  and,  the  plain- 
tiffs declining  to  reply,  judgment  was  rendered  disallowing  the  claim. 
The  plaintiff's  prosecute  this  appeal,  and  assign  for  error  the  ruling 
of  the  court  in  overruling  the  demurrer  to  the  defendant's  answers. 

Upon  a  determination  of  the  propriety  of  this  ruling  the  judgment 
of  the  court  below  must  either  be  affirmed  or  reversed. 

AVliether  or  not  contracts,  notes,  bills  and  other  securities,  growing 
out  of  transactions  similar  to  those  contemplated  by  Eanger  and 
Miller,  as  disclosed  by  the  facts  admitted  by  the  demurrer  to  the 
answers,  are  valid  and  collectible,  has  been  the  subject  of  much  con- 
sideration in  the  courts.  As  related  to  legitimate  commercial  trans- 
actions, and  the  recognized  methods  of  conducting  the  mercantile 
business  of  the  day,  the  importance  of  the  question  cannot  readily 
be  overestimated. 

Formerly  the  rule  was  that  articles  which  had  no  actual  or  poten- 
tial existence  at  the  time  of  the  contract,  were  not  the  subjects  of 
sale,  but  this  was  found  to  be  such  an  impediment  to  commerce  that 
"some  relaxation  in  the  rule  was  deemed  necessary.  It  is  now  estab- 
lished upon  indisputable  authority  that  a  contract  for  the  sale  and 
future  delivery  of  a  commodity  of  a  designated  kind  or  class,  which 
the  seller  does  not  own,  and  which  has  at  the  time  no  actual  exist- 
ence, but  which  may  be  supplied  by  purchase  in  the  market  at  the 
proper  time,  is  a  valid  contract,  provided  it  is  the  intention  of  the 
parties,  or  of  one  of  them,  at  the  time  the  contract  is  made,  that 
the  commodity  shall  actually  be  procured  by  the  seller,  and  supplied 
to  the  purchaser  at  or  before  the  maturity  of  the  agreement.  Cobb  v. 
Prell,  23  Am.  Law  Eeg.  n.  s.  609  and  note;  Crawford  v.  Spencer, 
92  Mo.  498,  1  Am.  St.  Rep.  745  and  note. 

In  such  a  case  it  does  not  invalidate  the  transaction  that  the 
parties,  or  either  of  them,  may  have  deposited  money,  as  a  margin, 
to  secure  the  performance  of  the  contract,  or  as  indemnity  against  loss 
in  case  one  or  the  other  fails  to  consummate  his  agreement.  As 
has  been  said,  "  present  ownership  is  of  less  consequence  than  the 
intention  of  the  contracting  parties."  Cockrell  v.  Thompson,  85  Mo. 
510 ;  Wall  v.  Schneider,  59  Wis.  352,  48  Am.  Eep.  520 ;  Whitesides 
V.  Hunt,  97  Ind.  191,  49  Am.  Eep.  441;  Gregory  v.  Wendell,  39  Mich. 
337,  33  Am.  Eep.  390. 

While  contracts  for  the  sale  of  property  to  be  delivered  in  the  fu- 
ture are  valid,  where  the  parties  or  either  one  of  them,  actually  con- 
template a  delivery  of  the  subject-matter  of  the  contract,  yet,  if  under 
the  guise  of  a  contract  which  has  the  appearance  of  validity  upon 
its  face,  the  real  intention  is  merely  to  speculate  on  the  rise  or  fall 
of  the  market,  without  any  purpose  that  any  property  shall  be  de- 
livered or  received,  but  with  the  understanding  that  at  the  appointed 


SONDHEIM   V.   GILBERT.  417 

time  the  account  is  to  be  adjusted  by  paying  or  receiving  the  dif- 
ference between  the  contract  and  the  current  price,  then  the  whole 
transaction  is  illegal,  as  against  public  policy,  and  falls  under  the 
condemnation  of  the  law.  Whitesides  v.  Hunt,  supra,  and  cases 
cited;   Irwin  v.  Williar,  110  U.  S.  499. 

The  facts  stated  in  the  answer  make  it  clear  that  the  transactions 
contemplated  by  Morris  Ranger  and  Conrad  Miller  were  not  the 
actual  purchase  and  acceptance  of  cotton,  but  mere  speculative  wagers 
upon  the  price  of  that  commodity  from  time  to  time  as  it  might  be 
quoted  on  the  New  York  cotton  exchange.  This  was  an  agreement 
to  engage  in  mere  wild  speculation  in  the  nature  of  gambling  or 
wagering  upon  the  fluctuations  in  the  price  of  cotton.  Such  transac- 
tions demoralize  and  embarrass  legitimate  trade,  and  are  subversive 
of  all  correct  business  principles,  destructive  of  commercial  integ- 
rity and  morality,  and  result  directly  or  indirectly  in  most  of  the 
bankruptcies,  defalcations,  and  forgeries  which  startle  and  distract 
business  circles.  Between  the  parties  to  such  a  transaction  and  all 
others  who  participate  in  the  specific  illegal  design,  with  the  inten- 
tion of  aiding  in  its  execution,  so  as  to  become  principals  or 
accessories  thereto,  any  contract  or  other  security  resulting  therefrom 
will  be  wholly  invalid.  But  in  the  absence  of  a  statute  in  direct 
terms  prohibiting  transactions  of  the  character  of  that  in  question, 
and  declaring  them  unlawful,  or  expressly  declaring  promissory  notes 
growing  out  of  such  a  transaction  invalid,  while  the  courts  will  on 
general  common-law  principles  declare  such  notes  invalid  between  the 
parties  and  those  who  were  accessory  to  the  illegal  act,  yet  in  order  to 
invalidate  a  note  or  other  security  in  the  hands  of  one  who  advanced 
money,  which  the  borrower  intended  to  and  did  employ  in  carrying 
on  an  illegal  enterprise,  it  has  been  held  that  it  was  not  enough  to 
defeat  a  recovery  that  the  lender  knew  the  borrower's  purpose.  He 
must  have  been  in  some  way  implicated  as  a  confederate  in  the 
specific  illegal  design  under  contemplation.  It  must  have  been  a  part 
of  the  contract,  or  there  must  have  been  in  some  way  such  a  com- 
bination of  intention  between  the  lender  and  borrower  that  the 
money  furnished  should  be  used  in  aid  of  and  to  promote  the  un- 
lawful enterprise,  as  that  the  former  became  particeps  criminis. 
Tyler  v.  Carlisle,  79  Maine,  210;  Waugh  v.  Beck,  114  Pa.  St.  422; 
Tracy  v.  Talmage,  14  N.  Y.  162;  Amot  v.  Pittson,  etc.  Coal  Co., 
68  N".  Y.  558. 

Thus  it  was  held  in  Bickel  v.  Sheets,  24  Ind.  1,  that  a  contract  for 
the  sale  of  property  which  the  purchaser  intended  to  use  for  gam- 
ing purposes,  in  violation  of  a  statute,  was  not  void,  although  the 
seller  was  informed  at  the  time  of  the  sale  of  the  purpose  for  which 
the  property  was  to  be  applied.  Cummings  v.  Henry,  10  Ind.  109 ; 
7n  re  Lister,  25  Eng.  Eep.  (Moak)  647  and  note;  Feineman  v. 
Sachs,  33  Kan.  621;  Distilling  Co.  v.  Nutt,  34  Kan.  724;  Fisher  v. 

27 


418  holder's  position. 

Lord,  63  N.  H.  514 ;  Parsons  Oil  Co.  v.  Boyett,  44  Ark.  230.  There 
must  be  knowledge  of  and  participation  in  the  illegal  or  immoral 
purpose. 

It  is  not  necessary,  however,  that  we  pursue  this  feature  of  the 
case  further,  as  it  is  conceded  upon  the  record  that  the  note  in  suit 
came  to  the  hands  of  the  plaintills  in  the  due  course  of  trade,  before 
maturity,  for  value  and  without  notice  of  the  purpose  for  which  it 
was  executed  or  drawn.  In  order,  therefore,  to  uphold  a  judgment 
which  invalidates  commercial  paper  in  the  hands  of  innocent  holders, 
such  as  plaintiffs  are  conceded  to  be,  it  is  essential  that  a  statute 
should  be  shown  governing  the  case,  which  in  direct  terms  declares 
that  transactions  such  as  those  here  involved  are  unlawful  and  that 
notes  given  under  the  circumstances  exhibited  by  the  facts  in  this  case 
are  absolutely  void. 

The  principle  may  be  considered  as  well  established  that  when  a 
statute  in  express  terms  pronounces  contracts,  notes,  bills,  securities 
and  the  like,  resulting  from  or  growing  out  of  wagering  or  gambling 
transactions,  which  are  prohibited  by  statute,  absolutely  void,  no 
recovery  can  be  had  thereon,  and  the  doctrine  that  transactions 
which  a  statute  in  direct  terms  declares  to  be  unlawful,  cannot 
acquire  validity  by  the  transfer  of  commercial  paper  based  thereon, 
which  is  also  under  direct  legislative  denunciation,  is  fully  sup- 
ported by  authority.  New  v.  Walker,  108  Ind.  365;  Thompson  v. 
Bowie,  4  Wall.  463;  Vallett  v.  Parker,  6  Wend.  615;  1  Daniel,  Neg. 
Inst.,  sections  197,  807.  In  such  a  case  the  note  will  be  declared  void 
in  the  hands  of  an  innocent  holder  in  pursuance  of  the  peremptory 
words  of  a  statute  which  embraces  in  its  terms  the  contract  or 
obligation  under  consideration.    Town  of  Eagle  v.  Kohn,  84  111.  292. 

The  authorities  justify  the  statement  that  a  defendant  may  insist 
upon  the  illegality  of  the  contract  or  consideration,  notwithstanding 
the  note  is  in  the  hands  of  an  innocent  holder  for  value,  in  all  those 
eases  in  which  he  can  point  to  an  express  declaration  of  the  legis- 
lature that  the  illegality  insisted  upon  shall  make  the  security, 
whether  contract,  bill  or  note,  void.  But,  unless  the  legislature  has 
so  declared,  then,  no  matter  how  illegal  or  immoral  the  consideration 
may  be,  a  commercial  note  in  the  hands  of  an  innocent  holder  for 
value  will  be  held  valid  and  enforceable.  Hatch  v.  Burroughs, 
1  Wood,  439 ;  Town  of  Eagle  v.  Kohn,  supra;  Third  Nat'l  Bank  v. 
Tinsley,  11  Mo.  App.  498;  Third  Nat'l  Bank  v.  Harrison,  3  McCrary, 
316,  10  Fed.  Rep.  243;  Edwards  v.  Dick,  4  B.  &  Aid.  212;  Day  v. 
Stuart,  6  Bing.  109;  Chitty,  Bills,  92;  2  Randolph,  Com.  Paper, 
section  511. 

It  is  argued,  however,  in  support  of  the  ruling  below,  that  because 
the  note  sued  on  was  negotiated  in  consideration  of  money  advanced 
with  which  to  prosecute  a  wagering  or  gambling  speculation,  it  is, 
nevertheless,  void  in  the  hands  of  an  innocent  holder  within  the 


SONDHEIM   V.    GILBERT.  419 

provisions  of  section  4950,  E.  S.  1881,  which  declares,  in  effect,  that 
all  notes,  bills,  etc.,  when  the  whole  or  any  part  of  the  consideration 
thereof  shall  be  for  money  or  other  valuable  thing  won  on  the  result 
of  any  wager,  or  for  repaying  money  lent,  at  the  time  of  such  wager, 
for  the  purpose  of  being  wageredj  shall  be  void. 

The  note  in  suit  having  been  executed  and  made  payable  in  the 
State  of  New  York,  and  it  appearing  that  the  alleged  illegal  trans- 
actions contemplated  by  the  parties  concerned  in  issuing  and  put- 
ting the  note  in  circulation  were  to  be  engaged  in  and  consummated 
in  the  State  of  New  York,  the  law  of  that  State  must  be  looked 
to  primarily  in  determining  the  validity  of  the  contract;  the  rule  in 
that  respect  being  that  a  contract,  valid  by  the  law  of  the  State  in 
which  it  is  made  and  is  to  be  performed,  is  valid  and  enforceable 
ever3^where,  unless  it  is  clearly  contrary  to  good  morals,  or  repug- 
nant to  the  policy  or  positive  statutes  of  the  jurisdiction  in  which 
it  is  sought  to  be  enforced.  Tilden  v.  Blair,  21  Wall,  241;  Wayne 
County  Savings  Bank  v.  Law,  81  N.  Y.  566 ;  Hawley  v.  Bibb,  69 
Ala.  52;  Stix  v.  Matthews,  75  Mo.  96;  Swann  v.  Swann,  21  Fed. 
Eep.  299;  Bums  v.  Grand  Eapids,  etc.  E.  E.  Co.,  113  Ind.  169; 
Flagg  V.  Baldwin,  38  N.  J.  Eq.  219,  48  Am.  Eep.  308;  Hyatt  v. 
Bank  of  Kentucky,  8  Bush,  193;  Milliken  v.  Pratt,  125  Mass.  374; 
Hill  V.  Spear,  50  N.  H.  253. 

A  contract,  although  valid  where  made,  will  not  be  carried  into 
effect  if,  by  the  laws  of  the  State  whose  jurisdiction  is  invoked,  the 
contract  which  is  sought  to  be  enforced  is  stigmatized  as  unlawful, 
and  so  prohibited. 

Eelying  upon  the  invalidity  of  the  note  by  force  of  the  lex  loci  con- 
tractus,  the  appellee  has,  as  we  have  seen,  pleaded  the  statute  of  the 
State  of  New  York,  relating  to  gaming  contracts,  in  one  of  the  para- 
graphs of  his  answer.  In  the  other  paragraph  he  relies  upon  the 
statute  of  our  own  State  to  invalidate  the  note.  By  section  8  of  the 
New  York  statute,  all  wagers,  bets  or  stakes  made  to  depend  upon  any 
lot,  chance,  casualty,  or  unknown  or  contingent  event,  are  declared  to 
be  unlawful,  and  all  contracts  for  or  on  account  of  any  money,  prop- 
erty or  thing  in  action  so  wagered,  bet  or  staked  are  declared  void. 
The  other  section  declares,  in  effect,  that  all  securities,  any  part  of 
the  consideration  of  which  is  money  won  by  playing  at  any  game,  or 
by  betting  on  the  hands  of  such  as  do  play  at  any  game,  or  to  repay 
any  money  knowingly  lent  at  the  time  and  place  of  any  such  play 
to  any  person  so  playing,  shall  be  utterly  void.  This  last  section  can 
have  no  possible  application  to  a  transaction  such  as  that  disclosed 
by  the  facts  in  the  present  case.  It  would  be  an  unwarranted  per- 
version of  common  and  correct  speech  to  hold  that  the  consideration 
of  a  note  which  had  been  executed  in  order  to  obtain  money  with 
which  to  purchase  options,  or  to  put  up  as  margins  in  cotton  specu- 
lations, was  money  won  by  playing  at  a  game  or  by  betting  on  the 


420  holder's  position. 

hands  of  others  who  do  play,  or  to  repay  money  lent  at  the  time  and 
place  of  such  play.  However  much  dealing  in  options  may  resemble 
gambling  or  betting,  and  demoralizing  and  pernicious  as  it  may  be, 
it  cannot,  with  any  degree  of  propriety,  be  said  to  be  winning  or 
losing  money  by  playing  at  or  betting  upon  any  game,  within  the 
meaning  of  the  statute.    White  v.  Barber,  123  U.  S.  392. 

In  respect  to  section  8,  above  referred  to,  it  may  be  said  the  dis- 
tinction between  contracts  for  or  on  account  of  any  money,  etc., 
wagered,  bet  or  staked  upon  any  game,  and  securities,  bills,  notes, 
etc.,  any  part  of  the  consideration  of  which  shall  be  money  won  or 
lost  by  playing  at  any  game,  etc.,  is  obvious. 

The  contracts  mentioned  are  the  agreements  of  the  parties  by 
which  they  undertake  beforehand  to  bind  themselves  to  pay  or  deliver 
to  the  winner  the  money,  property  or  thing  wagered,  bet  or  staked  on 
the  game  or  contingent  event.  These  are  declared  unlawful  and 
void,  and  so  they  are,  in  whosesoever  hands  they  may  be  found.  The 
things  in  action,  notes,  bills,  securities,  etc.,  referred  to  in  the  other 
section,  are  the  evidences  of  indebtedness  given  for  money  won 
or  lost  by  playing  at  any  game,  or  by  betting  on  the  hands  of  those 
who  play,  after  the  event,  or  for  money  knowingly  lent  at  the  time 
and  place  of  such  play  to  a  person  so  playing,  and  these  are  de- 
clared to  be  utterly  void,  and  so  they  are,  without  regard  to  their 
form  or  the  fact  that  they  may  be  in  the  hands  of  an  innocent  holder. 
City  of  Aurora  v.  West,  22  Ind.  88;  1  Daniel,  Neg.  Inst.,  section 
807 ;  Chitty,  Bills,  92 ;  New  v.  Walker,  supra;  Greenland  v.  Dyer, 
2  Manning  &  Eyl.  422;   2  Eandolph,  Com.  Paper,  section  511. 

The  note  sued  on  does  not  fall  within  the  terms  of  either  section 
of  the  New  York  statute.  The  paper  was  made  by,  and  was  payable 
to.  Miller  Brothers.  It  was  indorsed  by  them,  or  in  their  name,  and 
delivered  to  Eanger,  who  advanced  no  consideration  for  it,  but  nego- 
tiated it  to  persons  who  took  it  for  full  value  in  the  regular  course  of 
business  without  notice.  Until  the  paper  was  negotiated  for  a  con- 
sideration it  had  no  legal  inception  as  a  promissory  note.  In  the 
hands  of  the  parties  to  the  illegal  transactions  contemplated,  it  was 
not  a  note  given  upon  an  illegal  consideration,  but  it  was  a  paper  with- 
out any  consideration,  signed  merely  for  purposes  of  accommodation. 
After  it  was  negotiated  it  became  a  promissory  note,  the  consideration 
of  which  was  money  advanced  by  persons  who  had  no  notice  of  the 
illegal  purpose  for  which  the  parties  contemplated  using  it,  and  who 
were  in  no  way  or  sense  parties  implicated  in  the  illegal  confederacy. 

Having  reached  the  conclusion  that  the  statutes  of  the  State  of 
New  York  do  not,  in  terms,  render  void  mercantile  notes,  executed 
in  consideration  of  money,  which  the  parties  receiving  the  money 
intended  to  embark  in  gambling  speculations  on  the  stock  market, 
it  only  remains  that  we  say  that  the  statutes  of  our  own  State,  already 


SONDHEIM   V.   GILBERT.  421 

referred  to,  indicate  such  a  coincidence  in  the  policy  of  both  States 
as  that  the  courts  of  this  State  will  not  hesitate  to  enforce  the  lia- 
bility of  a  maker  of  a  note  such  as  that  involved  in  the  present  case  in 
the  hands  of  an  innocent  holder. 

It  is  not  necessary  that  we  should  remark  further  upon  the  effect 
of  the  Indiana  statute,  as  applied  to  notes  growing  out  of  transactions 
such  as  that  under  consideration,  when  such  notes  are  executed  and 
payable  in  this  State. 

It  is  enough  to  say  that  we  are  not  disposed  to  indulge  in  a  forced 
and  strained  construction  of  the  language  of  our  own  statute,  in 
order  to  reach  the  conclusion  that  to  enforce  payment  of  a  commercial 
note,  in  the  hands  of  an  innocent  holder,  which  is  not  within  the 
inhibition  of  the  statute  of  the  State  where  the  note  was  executed 
and  made  payable,  would  be  either  opposed  to  public  morals  or  vio- 
lative of  the  policy  or  law  of  this  State. 

It  appears  from  the  complaint  that  the  note  came  to  the  hands 
of  the  plaintiffs  in  the  usual  course  of  business,  for  value,  without 
notice  of  any  defect  in  the  consideration.  The  contention  that  the 
firm  of  Miller  Brothers  is  not  bound  because  the  paper  was  issued 
by  one  of  the  partners  without  the  consent  of  the  other,  in  a  matter 
outside  the  scope  of  the  partnership  business,  is,  therefore,  unavailing. 

It  is  quite  true  that  paper  issued  in  fraud  of  the  rights  of  the 
firm,  by  a  member  of  a  commercial  partnership,  upon  a  consideration 
outside  of  the  scope  of  the  firm  business,  while  it  remains  in  the 
hands  of  one  affected  with  notice,  or  in  whose  hands  it  is  subject  to 
like  defences  as  in  the  hands  of  the  payee,  is  not  enforceable  against 
the  partnership.  Irwin  v.  Williar,  supra;  Graves  v.  Kellenberger, 
51  Ind.  &&. 

"When,  however,  a  partnership  is  engaged  in  a  course  of  business 
in  which  the  use  of  commercial  paper  is  appropriate,  the  firm  is 
liable  upon  such  paper,  in  the  hands  of  a  hona  fide  holder,  issued 
in  the  firm  name  by  one  of  its  members,  notwithstanding  it  may  have 
been  issued  in  violation  of  his  duty  by  one  of  the  firm  without  the 
knowledge  or  consent  of  the  other  members.  First  ISTat'l  Bank.  etc. 
V.  Morgan,  73  N.  Y.  593;  Smith  v.  Collins,  115  Mass.  388;  Lindley, 
Partnership,  131. 

These  conclusions  lead  to  a  reversal  of  the  judgment. 

The  judgment  is  accordingly  reversed,  with  costs. 


422  holder's  position. 

STATE    CAPITAL   BANK   v.    THOMPSON". 

Supreme  Court  of  New  Hampshire,  June,  1861.     42  N.  H.  369. 

For  example,  a  negotiable  promissory  note  delivered  on  Sunday  is  valid  in  the 
hands  of  au  indorsee  for  value  without  notice. 

Assumpsit  against  the  makers  of  a  promissory  note  payable  to 
order  and  indorsed  by  the  payees  to  the  plaintiff.  Agreed  facts : 
The  note  was  not  dated  at  first,  but  the  date  was  afterwards  inserted 
by  the  payees  in  accordance  with  agreement  made  when  it  was  exe- 
cuted. The  note,  though  written  upon  a  week  day,  was  signed  and 
delivered  to  the  payees  on  Sunday.  The  plaintiff  bank  discounted 
the  note  for  value  and  without  notice. 

[Argument  not  reported.] 

Nesmith,  J.  It  is  well  settled  that,  as  between  the  original  parties 
to  a  promissory  note,  the  defendant  may  show  either  the  want  of 
consideration  or  the  illegality  of  it.  In  this  State,  under  the  con- 
struction of  our  statute  prohibiting  unnecessary  labor  on  Sunday,  the 
execution  and  delivery  of  a  promissory  note  upon  Sunday  has  been 
declared  "  business  of  a  person's  secular  calling,"  and  generally  an 
act  to  the  disturbance  of  others,  and  as  such  is  prohibited  under  a 
penalty,  and  when  subjected  to  it  amounts  to  an  implied  prohibition 
of  the  act  for  which  the  penalty  is  inflicted.  Brackett  v.  Hoyt,  38 
N.  H.  267;  Allen  v.  Deming,  14  N".  H.  133;  Smith  v.  Foster,  41 
N.  H.  215.  The  case  of  Allen  v.  Deming  was  founded  on  a  promis- 
sory note  originally  made  on  Sxmday  and  indorsed  to  the  plaintiff. 
The  decision  is  based  upon  the  ground  that  the  plaintiff  in  this  case 
could  not  be  presumed  to  be  or  treated  as  an  innocent  indorsee.  The 
fact  is  here  found  otherwise.  It  then  becomes  material  to  inquire 
how  far  the  negotiable  note  in  suit,  having  come  in  the  ordinary 
course  of  business  into  the  hands  of  a  hona  fide  holder  for  a  valuable 
consideration,  and  without  notice  of  any  defect  in  the  same,  can  now 
be  impeached  in  the  hands  of  the  present  plaintiff. 

We  understand  that  the  rule  adopted  and  acted  upon  in  England 
is,  that  when  the  legislature  has  declared  that  the  illegality  of  the 
contract  or  the  consideration  shall  make  the  note  absolutely  void,  the 
defendant  may  set  up  that  defence,  though  in  the  hands  of  a  hona 
fide  holder.  But  unless  it  has  been  so  expressly  declared  by  parlia- 
ment, illegality  of  consideration  will  be  no  defence  against  a  bona 
fide  holder  without  notice  and  for  a  valuable  consideration,  or  unless 
the  note  be  obtained  after  it  became  due  and  payable.  Lowe  v.  Waller, 
2  Doug.  735 ;    Chitty  on  Bills,  58,  104,  and  cases  cited. 

This  rule  is  applied  to  cases  affected  by  usury,  and  to  such  as  come 
within  the  penalties  of  the  statutes  prohibiting  gaming.    We  believe 


STATE   CAPITAL   BANK   V.   THOMPSON.  423 

the  Few  York  and  Massachusetts  courts  adhere  to  the  same  rule. 
3  Kent's  Com.  44 ;  Valette  v.  Parker,  6  Wend.  620 ;  Baker  v.  Arnold, 
3  Caines,  279;  Story  on  Bills,  222;  Bayley  on  Bills,  512-516.  The 
same  principle  has  been  adopted  in  this  State  where  the  sale  of 
spirituous  liquors  has  been  prohibited  by  penal  enactment.  In  Doe 
V.  Bumham,  31  jST.  H.  426,  the  defence  was  that  the  note  in  suit 
was  given  for  spirituous  liquors  sold  to  the  defendant  by  the  payee 
of  the  note,  contrary  to  the  statute,  etc.  But  it  having  been  shown 
that  the  plaintiff,  before  the  maturity  of  the  note,  took  it  on  good 
consideration  and  without  notice  of  any  illegality  in  the  consideration 
of  the  same,  the  defendant  was  refused  the  right  to  set  up  this  de- 
fence. Norris  v.  Langley,  19  N,  H.  423 ;  Great  Falls  Bank  v.  Farm- 
ington,  41  N.  H.  32.  So  also,  where  part  of  the  consideration  of  the 
note  is  illegal,  and  the  holder  occupies  the  position  of  an  innocent 
indorsee.  Clark  v.  Eicker,  14  N.  H.  44.  But  if  the  notes  be  taken 
when  overdue  or  dishonored,  the  illegality  of  the  consideration  can 
be  shown  as  matter  of  defence.    Ayer  v.  Hutchins,  44  Mass.  370. 

The  statutes  for  the  observance  of  the  Lord's  day  and  also  for 
restraining  the  sale  of  spirituous  liquors  were  doubtless  both  intended 
for  the  welfare  and  security  of  society  and  for  the  promotion  and 
enforcement  of  good  morals  and  right  conduct  in  the  community. 
The  statutes  are  both  penal  in  their  character,  and  similar  legal 
consequences  should  be  made  to  attach  to  their  violation.  In  the 
construction  and  application  of  these  statutes  to  contracts  made  under 
them  the  court  will  apply  like  rules  and  exceptions.  We  agree  to  the 
conclusion  of  Justice  Savage  in  Valette  v.  Parker,  before  referred  to : 
"  It  is  all  important  to  the  commercial  world  that  courts  do  not  go 
in  advance  of  the  legislature  in  rendering  negotiable  paper  void  in 
the  hands  of  an  innocent  indorsee.  WTierever  the  statutes  declare 
notes  void,  they  are  and  must  be  so  in  the  hands  of  every  holder; 
but  where  they  are  adjudged  by  the  court  to  be  so  for  failure  or  the 
illegality  of  consideration,  they  are  void  only  in  the  hands  of  original 
parties  or  those  who  are  chargeable  with  or  have  had  notice  of  the 
illegality  of  the  consideration  therein  contained."  We  also  under- 
stand our  conclusion  to  be  in  accordance  with  the  recent  decision 
of  the  court  in  the  case  of  Clark  v.  Pease,  41  N.  H.  414.^ 

Judgment  for  the  plaintiff. 

1  Ante,  p.  407. 


424  holder's  position. 

BAXTER   V.   LITTLE. 

BAXTER   V.    HARRIS. 

Supreme  Court  of  Massachusetts,  March,  1843.     6  Met.  7. 

A  set-off  is  not,  essentially,  an  equity ;  but  rights  which  existed  in  the  defendant 
against  the  payee  or  prior  holder  while  the  paper  was  in  the  hands  of  such  party,  may 
be  set  off  against  a  holder  who  takes  after  maturity. 

The  first  of  these  actions  was  by  the  indorsee  against  the  maker 
of  a  promissory  note  for  $330,  dated  March  1,  1837,  payable  to 
Joseph  Harris,  Jr.,  in  four  months,  and  by  him  indorsed.  The 
action  was  commenced  October  4,  1839. 

At  the  trial  before  the  Chief  Justice,  the  signatures  of  the  maker 
and  indorser  were  admitted  by  the  defendant,  and  he  relied  upon 
a  set-off  of  notes  against  the  Franklin  Bank,  upon  the  ground  that 
the  note  in  suit  was  held  by  that  bank,  after  it  was  due,  and  that  he 
had  a  right  to  make  the  same  defence  against  the  plaintiff,  as  if  the 
action  were  brought  by  the  bank. 

In  order  to  present  the  question  of  law,  it  was  mutually  conceded 
that  the  note  was  discounted  by  the  Franklin  Bank,  in  the  due  course 
of  business ;  that  it  was  held  by  the  bank,  when  it  became  due ;  that 
afterwards,  and  after  the  bank  had  stopped  payment,  in  pursuance 
of  a  vote  of  the  directors  to  pay  the  debts  of  the  bank  in  such  securi- 
ties as  they  had,  the  note  in  question,  on  the  20th  of  December,  1837, 
was  delivered  to  the  plaintiff,  or  to  the  person  under  whom  the  plain- 
tiff claims  title,  in  exchange  for  bills  of  said  bank,  at  par,  which 
bills  were  then  at  a  discount  in  the  market;  that  before  this  action 
was  brought  —  upon  notice  of  the  plaintiff's  attorneys  that  they  had 
such  a  note,  and  demanded  payment  thereof,  but  without  notice  to 
the  defendant  that  the  note  had  been  transferred  by  the  bank  —  the 
defendant  tendered  to  said  attorneys,  in  satisfaction  of  the  note,  bills 
of  the  Franklin  Bank,  which  they  declined  to  accept;  that  the  de- 
fendant has  ever  since  had  said  bills,  and  has  filed  them  in  offset 
in  this  action,  and  now  relies  upon  that  tender  and  set-off. 

The  second  of  these  actions  was  by  the  indorsee  against  the  in- 
dorser of  the  same  note,  and  all  the  facts  stated  in  the  previous  case 
were  agreed  to  in  this.  The  defendant  further,  in  this  case,  relied 
upon  a  balance  due  to  him  from  the  Franklin  Bank,  by  way  of  set-off 
to  the  note.  And  it  was  further  agreed  by  the  parties,  that  on  the 
5th  of  June,  1838,  there  was  due  to  the  defendant,  on  the  books  of 
said  bank,  a  balance  of  $293.63,  and  that  he  had  no  notice  of  the 
transfer  of  the  note  to  the  plaintiff,  until  this  suit  was  commenced; 
that  within  a  month  or  two  after  the  20th  of  December,  1837,  when 
the  note  was  passed  out  of  the  bank,  notice  was  given  to  the  defendant 
by  the  cashier,  that  it  was  so  passed  out ;  that  the  balance  above  men- 


BAXTER   V.   LITTLE.  425 

tioned,  due  to  the  defendant,  on  the  5th  of  June,  1839,  arose  from 
post  notes  deposited  on  that  day,  except  $12.88,  which  previously 
stood  to  his  credit;  and  that  the  deposit  then  made  cancelled  all 
demands  which  the  bank  had  against  him,  and  left  the  above  balance. 
It  was  agreed  in  each  case,  that  judgment  should  be  entered  for 
the  plaintiff,  if  in  the  opinion  of  the  court  he  was  entitled  to  recover ; 
otherwise,  that  the  plaintiff  should  become  nonsuit. 

[Argument  reported.] 

Shaw,  C.  J.  When  a  negotiable  note  is  indorsed  and  transferred 
after  it  is  due,  and  the  defendant  relies  upon  matter  of  set-off  which 
he  may  have  against  the  promisee,  he  can  avail  himself  only  of  such 
matter  of  defence  as  existed  between  himself  and  the  promisee,  at 
the  time  of  the  actual  indorsement  and  transfer  of  the  note  to  the 
holder.  A  note  does  not  cease  to  be  negotiable  because  it  is  overdue. 
The  promisee,  by  his  indorsement,  may  still  give  a  good  title  to  the 
indorsee.  Notes  or  other  matters  of  set-off,  acquired  by  the  defendant 
against  the  promisee,  after  such  transfer,  cannot  be  given  in  evidence 
to  such  note,  although  the  maker  had  no  notice  of  such  transfer,  at 
the  time  of  acquiring  his  demand  against  the  promisee.  Having  made 
his  promise  negotiable,  he  is  liable  to  any  tona  fide  holder  and  actual 
indorsee ;  and  therefore,  even  after  the  note  has  become  due,  in  mak- 
ing payments  to  the  original  promisee,  or  in  further  dealings  by 
which  he  gives  him  a  credit,  he  has  no  right  to  presume,  without 
proof,  that  the  promisee  is  still  the  holder  of  the  note.  Besides,  in 
case  of  payment  of  a  negotiable  note,  or  of  a  credit  which  the  maker 
intends  shall  operate  by  way  of  payment,  he  has  a  right  to  have  his 
note  given  up,  if  paid  in  full,  or  to  see  the  payment  indorsed,  if 
partial.  Should  he  insist  on  this  right,  in  the  case  proposed,  he 
would  at  once  perceive  that  the  person,  to  whom  he  is  making  pay- 
ment or  giving  credit,  is  no  longer  the  holder  of  the  note.  And 
this  appears  to  us  to  be  the  true  distinction  between  the  indorsement 
of  a  note  overdue,  and  the  assignment  of  a  chose  in  action.  In  the 
latter  case,  notice  of  the  assignment  must  be  given  by  the  assignee 
to  the  debtor,  to  prevent  him  from  making  payment  to  the  assignor. 
Without  such  notice,  he  has  no  reason  to  presume  that  the  original 
creditor  is  not  still  his  creditor;  and  payment  to  him  is  according 
to  his  contract  and  in  the  due  and  ordinary  course  of  business.  The 
assignee  takes  an  equitable  interest  only,  which  must  be  enforced  in 
the  name  of  the  assignor ;  ^  and,  until  notice,  he  has  no  equity  against 
the  debtor,  which  can  be  recognized  and  protected  by  a  court  of  law 
or  equity.  The  indorsee  of  a  note  overdue  takes  a  legal  title;  but 
he  takes  it  with  notice  on  its  face  that  it  is  discredited,  and  there- 
fore subject  to  all  paj^ments,  and  offsets  in  the  nature  of  payment. 

1  But  see  Rev.  Laws  of  Mass.,  ch.  173,  §  4. 


426  holder's  position. 

The  ground  is,  that  by  this  fact  he  is  put  upon  inquiry,  and  therefore 
he  shall  be  bound  by  all  existing  facts,  of  which  inquiry  and  true 
iufonuation  would  apprise  him;  but  these  could  only  apprise  him  of 
demands  then  acquired  by  the  maker  against  the  payee. 

We  are  aware  that  in  the  marginal  note  to  Sargent  v.  Southgate, 
5  Pick.  312,  which  is  the  leading  case  on  this  subject,  it  is  stated, 
that  "  in  an  action  by  the  indorsee  against  the  maker  of  a  nego- 
tiable note  indorsed  when  overdue,  the  defendant  may  file  in  set-off 
a  negotiable  note  made  to  him  by  the  payee  before  he  had  notice 
that  the  note  in  suit  was  assigned."  And  the  point  is  so  stated  in 
Minot's  Digest,  640.  No  such  decision  was  called  for,  in  that  case, 
because  all  the  demands,  relied  upon  by  way  of  set-off,  were  ac- 
quired by  the  defendant,  whilst  the  original  payee  was  holder  of 
the  note.  But  further;  on  a  careful  examination  of  the  opinion, 
we  think  it  will  not  be  found  that  there  is  any  such  dictum  in 
regard  to  notice.  The  inadvertence,  in  extracting  the  marginal  note 
from  the  case,  probably  arose  from  the  very  obvious  analogy  between 
the  case  of  the  indorsement  of  a  note  overdue,  and  the  assignment  of 
a  chose  in  action,  especially  as  there  was  nothing  in  the  facts  or  the 
argument  to  call  for  a  distinction  between  the  two  cases.  The  opin- 
ion of  the  court  in  that  case,  therefore,  is  net  an  authority  opposed 
to  the  ground  of  decision  adopted  in  this,  namely,  that  this  right 
of  set-off  must  be  confined  to  those  demands  against  the  payee  or 
prior  holder,  which  accrued  to  the  defendant,  whilst  such  payee 
or  prior  holder  was  the  actual  holder  of  the  note,  and  will  not  extend 
to  demands  which  accrued  afterwards,  although  no  notice  of  the  in- 
dorsement was  given  to  the  debtor. 

The  defendant  Little,  the  maker  of  the  note  now  in  suit,  not 
having  shown  that  he  held  the  bills  of  the  Franklin  Bank  at  the  time 
that  his  note  was  transferred  to  the  plaintiff,  he  cannot  set  them 
off,  in  this  suit.  In  a  case  in  New  York,  it  was  held  that  bills  of 
a  bank,  held  by  the  defendant  when  his  note  became  due,  could  not 
be  set  off,  in  an  action  brought  on  the  note  by  receivers  appointed 
previously.    Haxtun  v.  Bishop,  3  Wend.  13. 

The  English  rule,  in  allowing  set-off  in  an  action  upon  a  note,  is 
somewhat  more  limited  than  our  own,  confining  such  defence  to 
equities  arising  out  of  the  same  note,  or  transaction  connected  with 
it.  Burrough  v.  Moss,  10  Bam.  &  Cress.  558.  Here,  it  has  been 
held,  that  an  independent  demand  may  be  set  off,  where  in  other 
respects  the  party  is  entitled  to  go  into  that  defence.  Sargent  v. 
Southgate,  5  Pick.  312;   Eanger  v.  Gary,  1  Met.  375. 

Since  the  decision  in  Sargent  v.  Southgate,  the  principle  decided 
by  it  has  been  confirmed,  and  the  whole  subject  of  set-off  placed,  by 
the  Rev.  Sts.  c.  96,^  upon  grounds  more  distinct  and  satisfactory  than 
it  was  under  the  former  statutes. 

1  Key.  Laws  of  Mass.,  ch.  174. 


MASSACHUSETTS  NATIONAL  BANK   V.    SNOW.  427 

The  principles  already  stated  apply  a  fortiori  to  the  case  of  Harris, 
the  defendant  in  the  second  action,  who  was  indorser  of  the  same 
note.  The  note  was  transferred  to  the  plaintiff  by  the  Franklin  Bank, 
in  December,  1837,  soon  after  which,  the  defendant  had  actual  notice 
of  it  from  the  cashier;  and  it  is  found  that  the  deposit  to  the  credit 
of  the  defendant,  upon  which  he  relies  by  way  of  set-off,  was  made, 
and  the  credit  obtained,  in  June,  1838.  It  is  stated  indeed,  that 
prior  to  that  time  there  was  a  small  balance  to  his  credit,  on  deposit, 
of  $12.88,  but  there  were  other  demands  of  the  bank,  at  that  time, 
against  the  defendant,  exceeding  that  deposit;  so  that  the  whole 
of  the  defendant's  demand  against  the  bank,  offered  in  set-off,  ac- 
crued subsequently  to  the  transfer  of  the  note,  which  is  now  in  suit, 
to  the  plaintiff. 

Judgment,  in  both  cases,  for  the  plaintiff. 

Note.  —  Inasmuch  as  matter  of  set-off  does  not  arise  out  of  the  transaction 
giving  rise  to  tlie  instrument,  it  is  not,  in  the  strict  sense,  an  equity ;  statutes 
have,  however,  generally  provided  that,  in  a  suit  by  the  assignee  of  a  chose  in 
action,  the  defendant  may  set  off  against  the  plaintiff  any  claim  which  he  had 
against  the  assignor.  See  Rev.  Laws  of  Mass.  ch.  174,  §§  1,  4.  And  where 
such  statutes  exist,  it  is  generally  held  that  the  defendant  may  set  off  against 
the  indorsee  any  claim  which  he  had  against  the  indorser  at  the  time  of  trans- 
fer, where  the  transfer  was  made  after  maturity.  LaDue  i'.  Bank  of  Kasson, 
31  Minn.  33;  Armstrong  v.  Chadwick,  127  Mass.  156;  Tyler  v.  Boyce,  135 
Mass.  558;  2  Daniel,  Neg.  Inst.,  5th  ed.,  §§  1435-1437. 


MASSACHUSETTS  NATIONAL  BANK  v.    SNOW. 

Supreme  Court  of  Massachusetts,  January,  1905.     187  Mass.  159;  72  N.  E. 

Rep.  959. 

In  some  jurisdictions,  and  by  the  Statute,  the  want  of  deliveiy  of  a  complete  instru- 
ment is  but  an  equity,  available  only  between  the  parties,  or  against  a  holder  with 
notice.^ 

Action  by  the  holder  against  the  maker  of  a  promissory  note. 
The  facts  are  stated  in  the  opinion. 

[Argument  not  reported.] 

Knowlton,  C.  J.  This  is  an  action  of  contract  on  three  promis- 
sory notes,  signed  H.  G.  &  H.  W.  Stevens,  payable  to  the  order 
of  the  defendant,  indorsed  by  him  in  blank,  and  discounted  by  the 
plaintiff.  They  severally  bear  date  December  9,  1899,  and  the  rights 
of  the  parties  are  accordingly  governed  by  St.  1898,  c.  533,  some- 
times called  the  negotiable  instruments  act,  which  is  now  embodied 
in  Eev.  Laws,  c.  73,  §§  18-313,  inclusive.    In  reference  to  different 

1  N.  I.  L.  §§  32,  33. 


428  holder's  position. 

provisions  of  this  statute  it  may  be  convenient  to  cite  the  sections 
of  the  Revised  Laws,  rather  than  the  original  act. 

The  maker  of  the  notes,  H.  W.  Stevens,  who  did  business  under  the 
name  of  H.  G.  &  H.  W.  Stevens,  has  deceased,  and  the  defendant 
introduced  evidence  tending  to  show  that,  after  the  defendant  had 
indorsed  the  notes,  they  were  taken  from  his  possession  by  the  maker, 
without  his  knowledge  or  consent,  and  discounted  at  the  plaintiff 
bank,  and  that  they  were  altered  by  the  insertion  of  the  words  "  seven 
per  cent "  after  the  words  "  with  interest."  The  defence  is  founded 
on  this  evidence.  The  defendant's  counsel  stated  that  he  made  no 
contention  that  the  bank  had  actual  knowledge  of  any  infirmity  in 
the  instruments,  or  defect  in  the  title  to  them,  or  that  it  took  them 
in  bad  faith.  Nor  was  it  contended  by  the  defendant  that  in  dis- 
counting the  notes  the  bank  acted  otherwise  than  in  the  regular  and 
usual  course  of  business.  But  upon  the  defendant's  testimony  it 
might  be  found  that  the  notes  were  given  to  him  by  the  maker  in 
pa}Tnent  of  indebtedness,  that  after  he  had  indorsed  them  in  blank, 
and  put  them  in  his  desk  for  collection  or  discount,  he  was  called 
out  of  his  office,  leaving  the  maker  Stevens,  there,  and  that  Stevens 
then  took  them  without  right,  and  three  days  later  carried  them  to 
the  plaintiff  bank  and  caused  them  to  be  discounted  for  his  own 
benefit. 

The  plaintiff  made  many  requests  for  rulings,  which  were  refused, 
subject  to  its  exception. 

The  notes,  being  indorsed  in  blank,  were  payable  to  bearer,  within 
the  meaning  of  the  statute.  Eev.  Laws,  c.  73,  §  26  (5).  When  the 
notes  were  taken  to  the  plaintiff  for  discount,  Stevens  was  the  bearer. 
Rev.  Laws,  c.  73,  §  207.  The  presentation  of  such  notes  for  discount 
raised  a  presumption  of  fact  that  the  bearer  was  the  owner  of  them. 
Pettee  v.  Prout,  3  Gray,  502,  63  Am.  Dec.  778.  Upon  the  undis- 
puted evidence  and  upon  the  defendant's  admission  that  the  plain- 
tiff took  them  in  good  faith,  and  discounted  them  without  knowledge 
of  any  infirmity  in  them  or  defect  of  title  in  Stevens,  the  plaintiff 
became  a  holder  in  due  course,  within  the  definition  of  the  statute. 
Eev.  Laws,  c.  73,  §§  69-76;  Boston  Steel  &  Iron  Company  v.  Steuer, 
183  Mass.  140,  66  N.  E.  646,  97  Am.  St.  Rep.  426.  There  was  not 
even  anything  to  put  the  plaintiff  upon  inquiry,  for  the  rate  of  inter- 
est was  the  same  that  Stevens  had  been  paying  on  his  loans  from 
the  bank  for  two  years.  The  uncontradicted  evidence,  as  well  as 
the  defendant's  admission,  makes  it  plain  that  the  plaintiff  had  no 
notice  of  any  infirmity  in  the  instruments,  or  defect  in  the  title  of 
Stevens,  under  the  rule  prescribed  by  the  statute.  Rev.  Laws,  c.  73, 
§  73.  This  rule,  namely,  that  to  constitute  such  notice,  the  person 
to  whom  the  note  is  negotiated  must  have  had  actual  knowledge  of 
the  infirmity  or  defect,  or  knowledge  of  such  facts  that  his  action 


MASSACHUSETTS   NATIONAL   BANK   V.   SNOW.  429 

in  taking  the  instrument  amounted  to  bad  faith,  is  the  same  as  pre- 
vailed in  this  Commonwealth  before  the  enactment  of  the  statute. 
Smith  V.  Livingston,  111  Mass.  343;  Lee  v.  WTiitney,  149  Mass.  447, 

21  N.  E.  948;  International  Trust  Co.  v.  Wilson,  161  Mass.  80,  90, 
36  N.  E.  589. 

The  defendant's  contention  that  after  the  notes  had  been  delivered 
to  the  defendant  and  indorsed  by  him,  they  were  stolen  by  Stevens, 
brings  us  to  the  question  whether,  under  the  negotiable  instruments 
act,  a  holder  in  due  course  of  a  note  payable  to  bearer,  that  has 
been  stolen,  can  acquire  a  good  title  from  the  thief.  Even  before 
the  enactment  of  the  statute,  while  the  decisions  were  not  uniform, 
the  weight  of  authority  was  in  favor  of  an  affirmative  answer  to  the 
question.  Wheeler  v.  Guild,  20  Pick.  545,  550,  553,  32  Am.  Dec. 
231;  Worcester,  etc.  Bank  v.  Dorchester,  etc.  Bank,  10  Cush.  488, 
57  Am.  Dec.  120;  Wyer  v.  Same,  11  Cush.  51,  53,  59  Am.  Dec.  137; 
Spooner  v.  Holmes,  102  Mass.  503,  3  Am.  Eep.  491;  London  Joint 
Stock  Bank  v.  Simmons,  1892,  App.  Cas.  201,  and  cases  cited; 
Smith  V.  Bank,  1  Q.  B.  D.  31;  Goodman  v.  Simonds,  20  How.  343- 
365,  15  L.  Ed.  934;  Murray  v.  Lardner,  2  Wall.  110,  17  L.  Ed. 
857;    Hotchkiss  v.  National  Shoe  &  Leather  Bank,  21  Wall.  354, 

22  L.  Ed.  645;  Kinyon  v.  Wohlford,  17  Minn.  239  (Gil.  215),  10 
Am.  Eep.  165 ;  Clarke  v.  Johnson,  54  111.  296 ;  Seybel  v.  National 
Currency  Bank,  54  N.  Y.  288,  13  Am.  Eep.  583;  Evertson  v.  Na- 
tional Bank  of  Newport,  QQ  N.  Y.  14,  23  Am.  Eep.  9;  Kuhns  v. 
Gettysburg  National  Bank,  68  Pa.  St.  445. 

The  following  specific  language  of  the  statute  touching  this  ques- 
tion, as  well  as  its  provisions  in  other  sections,  was  intended  to  estab- 
lish the  law  in  favor  of  holders  in  due  course.  "  But  where  the 
instrument  is  in  the  hands  of  a  holder  in  due  course  a  valid  delivery 
thereof  by  all  parties  prior  to  him  so  as  to  make  them  liable  to  him 
is  conclusively  presumed."  Eev.  Laws,  c.  73,  §  33.  This  conclusive 
presumption  exists  as  well  when  the  note  is  taken  from  a  thief  as  in 
any  other  case.  Of  course  this  rule  does  not  apply  to  an  instrument 
which  is  incomplete.  But  in  reference  to  a  complete  negotiable 
promissory  note,  payable  to  bearer,  it  is  a  wholesome  and  salutary 
provision.  See  Greeser  v.  Sugarman,  76  N.  Y.  Supp.  922.  Upon 
the  defendant's  statement  and  the  counsel's  theory  of  the  case, 
the  rule  is  applicable.  The  note  was  not  only  complete  in  form  and 
in  execution,  but,  upon  his  testimony,  it  had  been  delivered  to  him 
by  the  maker  as  a  binding  instrument,  and  had  afterwards  been  in- 
dorsed by  him.  Therefore  the  first  sentence  of  Eev.  Laws,  c.  73,  §  33, 
"  Every  contract  on  a  negotiable  instrument  is  incomplete  and  revo- 
cable until  delivery  of  the  instrument  for  the  purpose  of  giving  effect 
thereto,"  was  inapplicable.^     The  instrument  had  taken  effect,  and 

1  The  arf^ament  here  must  be  taken  to  mean,  that,  inasmuch  as  the  instrnment 
had  been  delivered  for  the  purpose  of  giving  effect  thereto,  the  first  clause  of  the  sec- 


430  holder's  position. 

was  subsequent!)'  negotiated  by  the  bearer  to  the  plaintiff  as  a  holder 
in  due  course.  Tliat  the  bearer  was  also  the  maker  was  immaterial 
after  the  instrument  had  been  so  indorsed  as  to  become  payable  to 
bearer.  Upon  the  plaintiff's  theory  of  the  facts,  there  was  no  theft, 
but  an  ordinary  accommodation  indorsement  by  the  defendant  for 
the  benefit  of  the  maker,  and  none  of  these  questions  arise.  We  are 
of  opinion  that  the  judge  erred  in  giving  the  fourth  and  fifth  instruc- 
tions requested  by  the  defendant,  and  in  refusing  other  instructions 
requested  by  the  plaintiff,  founded  upon  a  different  view  of  the 
statute. 

There  was  also  error  in  the  instructions  given  as  to  the  alleged 
alteration  of  the  notes.  By  Rev.  Laws,  c.  73,  §  141,  it  is  provided 
that  "  when  an  instrument  has  been  materially  altered  and  is  in  the 
hands  of  a  holder  in  due  course,  not  a  party  to  the  alteration,  he  may 
enforce  pa\Tnent  thereof  according  to  its  original  tenor."  This  lan- 
guage is  directlv  applicable  to  the  present  case.  See  Scholfield  v.  Earl 
of  Londesboroi"igh,  1894,  2  Q.  B.  660,  1895,  1  Q.  B.  536,  1896, 
A.  C.  514;  Schwartz  v.  Wilmer,  90  Md.  136-143,  44  Atl.  1059. 

We  understand  that  the  instructions  were  given  independently  of 
any  question  of  pleading,  and  we  therefore  do  not  deem  it  necessary 
to  determine  at  this  stage  of  the  case,  whether  the  plaintiff  should 
amend  its  declaration  by  inserting  counts  upon  the  notes  as  they  were 
before  the  alleged  alteration,  if  it  wishes  to  recover  upon  them  as 
notes  bearing  interest  at  only  six  per  cent.  See  Mutual  Loan  Ass'n  v. 
Lesser,  78  N.  Y.  Supp.  629.  Nor  do  we  consider  other  questions 
which  are  not  likely  to  arise  upon  a  second  trial. 

Exceptions  sustained. 


BURSON   V.    HUNTINGTON". 
Supreme  Court  of  Michigan,  October,  1870.     21  Mich.  415. 
In  other  jurisdictions,  by  the  unwritten  law,  want  of  delivery  is  deemed  an  abso- 
lute defence,  available  even  against  a  bona  fide  holder. 

Assumpsit  against  the  defendant  as  maker  of  a  negotiable  promis- 
sory note,  payable  to  the  order  of  A.  N.  Goldwood,  and  hy  him 

tion  referred  to  need  not  be  discussed,  since  it  wag  not  applicable  to  the  facts.  But  it 
is  apprehended  that  this  clause  makes  no  peculiar  case.  Tlie  Statute  provides  that 
"  Every  contract  on  a  negotiable  instrument  is  incomplete  and  revocable  until  delivery 
of  the  instrument  for  the  purpose  of  giving  effect  thereto.  .  .  .  But  where  tlie  instru- 
ment is  in  the  hands  of  a  holder  in  due  course  a  valid  delivery  by  all  parties  prior  to 
him  so  as  to  make  them  liable  to  him  is  conclusively  presumed."  And  even  in  an  ac- 
tion by  a  bona  fide  holder  against  the  maker,  the  latter  could  not  set  up  want  of  deliv- 
ery, and  the  fact  that  the  instrument  had  never  been  delivered  for  the  purpose  of  giving 
effect  thereto,  could  not  be  shown ;  the  delivery  is  conclusively  presumed.  In  this 
case,  the  suit  was  upon  the  indorser's  contract,  wliich,  in  fact,  had  never  been  delivered  ; 
the  fact,  however,  could  not  be  shown,  because  of  the  provision  of  the  Statute,  quoted 
supra.  It  was  quite  immaterial  that  another's  contract,  to  wit,  the  maker's,  had  been 
delivered. 


BUESON   V.    HUNTINGTON.  431 

indorsed  to  the  plaintiff  for  value,  and,  as  certain  disputed  evidence 
tended  to  show,  in  good  faith,  without  notice  of  the  facts  set  up  in 
defence.  The  note  was  made  in  negotiations  with  Goldwood  for  the 
purchase  by  the  maker  of  an  interest  in  a  patent  right. 

The  defendant  made  affidavit  denying  the  delivery  of  the  note,* 
affirming  therein  that  the  instrument  sued  upon  "  was  never  deliv- 
ered by  this  defendant  to  the  said  A.  N.  Goldwood,  mentioned  in  said 
written  instrument,  nor  to  any  other  person  for  the  said  A.  N.  Gold- 
wood,  or  any  other  person,  and  that  this  defendant  never  authorized 
any  other  person  to  deliver  the  written  instrument  for  him,  this 
defendant  to  the  said  A.  N.  Goldwood,  or  to  any  other  person ;  .  .  . 
that  said  written  instrument  was  taken  from  the  house  of  this  de- 
fendant, in  this  defendant's  absence  from  the  same,  by  the  said  A.  N. 
Goldwood,  without  the  knowledge  or  consent  of  the  deponent  at  the 
time."  There  was  evidence  tending  to  support  this,  for  which  see 
the  opinion. 

Counsel  for  the  defendant  asked  for  the  following  charge,  in  sub- 
stance, to  the  jury:  If  they  find  that  A.  N.  Goldwood,  the  payee, 
took  this  note  after  it  was  drawn  and  signed  by  the  defendant  without 
the  knowledge  and  against  the  will  and  consent  of  the  defendant, 
and  before  the  defendant  had  delivered  the  note  to  any  person,  the 
note  thus  obtained  would  be  void  in  the  hands  of  Goldwood,  and  in 
the  hands  of  any  subsequent  holder  deriving  possession  from  him, 
whether  for  value  or  not ;  and  that  the  note,  if  not  delivered  by  the 
defendant  or  by  his  authority,  had  no  legal  existence,  and  was  there- 
fore void. 

The  court  declined  to  charge  as  thus  requested,  and  under  the 
charge  given  the  jury  found  for  the  plaintiff.  "Writ  of  error  by  the 
defendant.     [Facts  foreign  to  the  present  purpose  are  omitted.] 

[Argument  reported.] 

Christiancy,  J 

But  this  note  was  indorsed  by  Goldwood,  the  payee,  to  the  plain- 
tiff, before  maturity,  for  a  valuable  consideration,  and,  as  plaintiff 
claims,  in  good  faith  and  without  notice  of  a  want  of  delivery  or  of 
consideration,  or  any  other  circumstance  tending  to  invalidate  it  in 
the  hands  of  Goldwood ;  and  his  evidence  tended  to  show  this,  though 
there  was  evidence  of  some  circumstances  tending  to  show  that  he 
had  notice  of  the  circumstances  under  which  the  paper  had  been 
obtained. 

There  was  also  evidence  on  the  part  of  the  defendant  strongly 
tending  to  show  that  the  note  never  was  delivered  by  the  defendant, 
but  that  Goldwood,  to  whose  order  it  was  drawn,  was  endeavoring  to 
sell  to  the  defendant  a  patent  right,  or  the  right  of  certain  territory 

1  Under  statute  relating  to  denial  of  execution  on  oath. 


432  holder's  position. 

under  it,  and  that  the  parties  had  so  far  progressed  towards  the  mak- 
ing of  an  arrangement  to  this  end  that  it  was  understood  and  verbally 
agreed  that  Goldwood  was  to  give  him  a  deed  of  certain  territory 
upon  defendant's  executing  to  him  a  note  for  the  amount,  with  some 
other  person  signing  it  as  surety.  That  the  parties  being  in  the  de- 
fendant's house,  and  the  defendant's  sister  being  present,  Goldwood 
wrote  this  note  and  defendant  signed  it;  but  as  a  surety  was  to  be 
obtained,  he  laid  the  note  on  the  table  and  went  out  to  find  his  uncle 
for  that  purpose,  telling  Goldwood,  as  he  went  out,  not  to  touch  it  till 
he  came  back;  but  that  while  defendant  was  gone  Goldwood  picked 
up  the  paper  and  started  outdoors  with  it;  that  defendant's  sister 
then  told  him  to  let  the  note  be  on  the  table  till  defendant  should 
come  back,  to  which  Goldwood  replied  he  was  going  to  have  the  note, 
and  went  off  with  it,  without  giving  any  deed  of  territory  or  anything 
else  for  it.  That  the  note,  at  this  time,  was  not  stamped,^  and  de- 
fendant never  stamped  or  authorized  it  to  be  stamped;  that  some 
four  days  after,  Goldwood  wrote  to  defendant  requesting  him  to 
come  immediately  to  Kalamazoo  "  and  sign  stamp  on  the  note,"  and 
saying  if  defendant  was  not  there  by  Tuesday  evening,  "  I  shall  con- 
sider that  you  refuse  your  signature,  and  shall  act  accordingly."  The 
evidence  also  tended  to  show  that  defendant  called  upon  Goldwood 
about  that  time,  while  the  latter  had  the  note,  and  demanded  it, 
accusing  him  of  stealing  it,  to  which  Goldwood  replied,  "  Never 
mind,  we  can  fix  that  up,"  and  said  he  was  ready  to  do  as  he  had 
agreed,  and  wanted  defendant  to  get  another  signer  and  he  would 
give  him  a  deed  of  territory ;  but  defendant  said  he  did  not  want  the 
deed,  but  wanted  the  note.  Goldwood  refused  to  return  the  note,  or 
to  give  a  deed  till  he  got  another  signer. 

These  facts,  if  found  by  the  jury,  would  show,  not  only  that  the 
note  was  never  delivered  to  the  pa5^ee,  and  that  it  therefore  never  had 
a  legal  existence  as  a  note  between  the  original  parties,  but  that  there 
was  yet  no  completed  or  binding  agreement  of  any  kind,  and  was  not 
to  be  until  defendant  should  choose  to  get  a  surety  on  the  note  and 
the  payee  should  give  him  a  deed  of  territory.  Until  thus  com- 
pleted, the  defendant  had  a  right  to  retract. 
\  As  a  general  rule  a  negotiable  promissory  note,  like  any  other 
\  written  contract,  has  no  legal  inception  or  valid  existence,  as  such, 
'  until  it  has  been  delivered  in  accordance  with  the  purpose  and  intent 
of  the  parties.  See  Edwards  on  B.  and  N.  175,  and  authorities  cited, 
and  1  Pars,  on  B.  and  N.  48  and  49,  and  cases  cited ;  and  see  Thomas 
V.  Watkins,  16  Wis.  549 ;  Mahon  v.  Sawyer,  18  Ind.  73 ;  Carter  v. 
McClintock,  29  Mo.  464.  Delivery  is  an  essential  part  of  the  making 
or  execution  of  the  note,  and  it  takes  effect  only  from  delivery  (for 
most  purposes) ;  and  if  this  be  subsequent  to  the  date,  it  takes  effect 

*  As  was  required  at  that  time  by  act  of  Congress. 


BURSON   V.  HUNTINGTON.  433 

from  the  delivery  and  not  from  the  date.    1  Pars,  uhi  supra.    This  / 
is  certainly  true  as  between  the  original  parties.  I 

But  negotiable  paper  differs  from  ordinary  written  contracts  in 
this  respect,  that  even  a  wrongful  holder,  between  whom  and  the 
maker  or  indorser  the  note  or  indorsement  would  not  be  valid,  may 
yet  transfer  to  an  innocent  party,  who  takes  it  in  good  faith,  without 
notice,  and  for  value,  a  good  title  as  against  the  maker  or  indorser. 
And  the  question  in  the  present  case  is,  how  far  this  principle  will 
dispense  with  delivery  by  the  maker. 

When  a  note  payable  to  bearer,  which  has  once  become  operative  by 
delivery,  has  been  lost  or  stolen  from  the  owner,  and  has  subsequently 
come  to  the  hands  of  a  bona  fide  holder  for  value,  the  latter  may 
recover  against  the  maker  and  all  indorsers  on  the  paper  when  in  the 
hands  of  the  loser;  and  the  loser  must  sustain  the  loss.  In  such  a 
case  there  was  a  complete  legal  instrument;  the  maker  is  clearly 
liable  to  pay  it  to  some  one,  and  the  question  is  only  to  whom.  But  in 
the  case  before  us,  where  the  note  had  never  been  delivered,  and 
therefore  had  no  legal  inception  or  existence  as  a  note,  the  question 
is  whether  he  is  liable  to  pay  at  all,  even  to  an  innocent  holder  for 
value. 

The  wrongful  act  of  a  thief  or  a  trespasser  may  deprive  the  holder 
of  his  property  in  a  note  which  has  once  become  a  note,  or  property', 
by  delivery,  and  may  transfer  the  title  to  an  innocent  purchaser  for 
value.  But  a  note  in  the  hands  of  the  maker  before  delivery  is  not 
property,  nor  the  subject  of  ownership,  as  such ;  it  is,  in  law,  but  a  / 
blank  piece  of  paper.  Can  the  theft  or  wrongful  seizure  of  this  paper  I 
create  a  valid  contract  on  the  part  of  the  maker  against  his  will,  where 
none  existed  before?  There  is  no  principle  of  the  law  of  contracts 
upon  which  this  can  be  done,  unless  the  facts  of  the  case  are  such 
that,  in  justice  and  fairness,  as  between  the  maker  and  the  innocent 
holder,  the  maker  ought  to  be  estopped  to  deny  the  making  and 
delivery  of  the  note. 

But  it  is  urged  that  this  case  falls  within  the  general  principle, 
which  has  become  a  maxim  of  law,  that  when  one  of  two  innocent  / 
persons  must  suffer  by  the  acts  of  a  third,  he  who  has  enabled  such/ 
third  person  to  occasion  the  loss  must  sustain  it.^    This  is  a  principle/ 
of  manifest  justice  when  confined  within  its  proper  limits.    But  the 
principle,  as  a  rule,  has  many  exceptions;  and  the  point  of  difficulty 
in  its  application  consists  in  determining  what  acts  or  conduct  of 
the  party  sought  to  be  charged  can  properly  be  said  to  have  "  enabled 
the  third  person  to  occasion  the  loss,"  within  the  meaning  of  the 
rule.     If  I  leave  my  horse  in  the  stable  or  in  the  pasture,  I  cannot 
properly  be  said  to  have  enabled  the  thief  to  steal  him,  within  the 
meaning  of  this  rule,  because  he  found  it  possible  to  steal  him  from 
that  particular  locality.    And  upon  examination  it  will  be  found  that 

1  Bigelow,  Bills  and  Notes,  204. 
28 


434  holder's  position. 

this  rule  or  maxim  is  mainly  confined  to  cases  where  the  party  who 
is  made  to  suffer  the  loss  has  reposed  a  confidence  in  the  third  person 
whose  acts  have  occasioned  the  loss,  or  in  some  other  intermediate 
person  whose  acts  or  negligence  have  enabled  such  third  person  to 
occasion  the  loss ;  ^  and  that  the  party  has  been  held  responsible  for 
the  acts  of  those  in  whom  he  had  trusted  upon  grounds  analogous  to 
those  which  govern  the  relation  of  principal  and  agent;  that  the 
party  thus  reposing  confidence  in  another  with  respect  to  transactions 
by  which  the  rights  of  others  may  be  affected,  has,  as  to  the  persons 
to  be  thus  affected,  constituted  the  third  person  his  agent  in  some 
sense,  and  having  held  him  out  as  such,  or  trusted  him  with  papers 
or  indicia  of  ownership  which  have  enabled  him  to  appear  to  others 
as  principal,  as  owner,  or  as  possessed  of  certain  powers,  the  person 
reposing  this  confidence  is,  as  to  those  who  have  been  deceived  into 
parting  with  property  or  incurring  obligations  on  the  faith  of  such 
appearances,  to  be  held  to  the  same  extent  as  if  the  fact  had  accorded 
with  such  appearances. 

Hence,  to  confine  ourselves  to  the  question  of  delivery,  the  author- 
/  ities  in  reference  to  lost  or  stolen  notes  which  have  become  operative 
/  by  delivery,  have  no  bearing  upon  the  question.  If  the  maker  or 
indorser,  before  delivery  to  the  payee,  leave  the  note  in  the  hands  of 
a  third  person  as  an  escrow,  to  be  delivered  upon  certain  conditions 
only,  or  voluntarily  deliver  it  to  the  payee,  or  (if  payable  to  bearer) 
to  any  other  person  for  a  special  purpose  only,  as  to  be  taken  to  ^r 
discounted  by  a  particular  bank,  or  to  be  carried  to  any  particular 
place  or  person,  or  to  be  used  only  in  a  certain  way,  or  upon  certain 
conditions  not  apparent  upon  the  face  of  the  paper,  and  the  person 
to  whom  it  is  thus  intrusted  violate  the  confidence  reposed  in  him  and 
put  the  note  into  circulation;  this,  though  not  a  valid  delivery  as  to 
the  original  parties,  must,  as  between  a  bona  fide  holder  for  value 
and  the  maker  or  indorser,  be  treated  as  a  delivery,  rendering  the 
note  or  indorsement  valid  in  the  hands  of  such  bona  fide  holder;  or 
if  the  note  be  sent  by  mail  and  get  into  the  wrong  hands,  as  the  party 
Intended  to  deliver  to  some  one,  and  selects  his  o^vn  mode  of  delivery, 
he  must  be  responsible  for  the  result.  These  principles  are  too  well 
settled  to  call  for  the  citation  of  authorities,  and  manifestly  it  will 
make  no  difference  in  this  respect  if  the  note  or  indorsement  were 
signed  in  blank,  if  the  maker  or  indorser  part  with  the  possession  or 
authorize  a  clerk  or  agent  to  do  so,  and  it  is  done.  1  Parsons  on  Bills 
and  Notes,  109-114,  and  cases  cited,  especially  Putnam  v.  Sullivan, 
4  Mass.  45,2  which  was  decided  expressly  upon  the  ground  of  the  con- 
fidence reposed  in  the  third  person,  as  to  the  filling  up,  and  in  the 
clerks  as  to  the  delivery. 

And  when  the  maker  or  indorser  has  himself  been  deceived  by  the 
fraudulent  acts  or  representations  of  the  payee  or  others,  and  thereby 
1  Bigelow,  Bills  and  Notes,  204,  206.  ^  j^„te,  p.  404. 


BURSON  V.  HUNTINGTON.  435 

induced  to  deliver  or  part  with  the  note  or  indorsement,  and  the  same 
is  thus  fraudulently  obtained  from  him,  he  must  doubtless,  as  between 
him  and  an  innocent  holder  for  value,  bear  the  consequences  of  his 
own  credulity  and  want  of  caution.  He  has  placed  a  confidence  in 
another,  and  by  putting  the  papers  into  his  hands  has  enabled  him  to 
appear  as  the  owner  and  to  deceive  others.  Cases  of  this  kind  are 
numerous ;  but  they  have  no  bearing  upon  the  wrongful  taking  from 
the  maker  when  he  never  voluntarily  parted  with  the  instrument. 
Much  confusion,  however,  has  arisen  from  the  general  language  used 
in  the  books,  and  sometimes  by  judges,  in  reference  to  cases  where 
the  maker  has  voluntarily  parted  with  the  possession,  though  induced 
to  do  so  by  fraud ;  where  it  is  laid  down  as  a  general  rule  that  it  is 
no  defence  for  a  maker,  as  against  a  bona  fide  holder,  to  show  that 
the  note  was  wrongfully  or  fraudulently  obtained,  without  attempting 
to  distinguish  between  cases  where  the  maker  has  actually  and  vol- 
untarily parted  with  the  possession  of  the  note,  and  those  where  he 
has  not. 

We  do  not  assert  that  the  general  rule  we  are  discussing  —  that 
"  where  one  of  two  innocent  parties  must  suffer,"  etc.  —  must  be  con- 
fined exclusively  to  cases  where  a  confidence  has  been  placed  in  some 
other  person  (in  reference  to  delivery)  and  abused.  There  may  be 
cases  where  culpable  negligence  or  recklessness  of  the  maker  in  allow- 
ing an  undelivered  note  to  get  into  circulation  might  justly  estop 
him  from  setting  up  non-delivery ;  as  if  he  were  knowingly  to  throw 
it  into  the  street,  or  otherwise  leave  it  accessible  to  the  public,  with 
no  person  present  to  guard  against  its  abduction  under  circumstances 
when  he  might  reasonably  apprehend  that  it  would  be  likely  to  be 
taken. 

The  evidence  tends  to  show  that  when  he  left  the  room  in  his  own 
house,  the  note  being  on  the  table,  and  his  sister  remaining  there,  he 
did  not  confide  it  to  the  custody  of  the  payee,  but  told  him  not  to  take 
it,  and  no  final  agreement  between  them  had  yet  been  made  and  no 
consideration  given.  Under  such  circumstances  he  can  no  more  be 
said  to  have  trusted  it  to  the  payee's  custody  or  confidence  than  that 
he  trusted  his  spoons  or  other  household  goods  to  his  custody  or  confi- 
dence; and  there  was  no  more  apparent  reason  to  suppose  he  would 
take  and  carry  off  the  one  than  the  other. 

The  maker  therefore  cannot  be  held  responsible  for  any  negligence ; 
there  was  nothing  to  prove  negligence,  unless  he  was  bound  to  sus- 
pect and  treat  as  a  knave,  a  thief,  or  a  criminal  the  man  who  came  to 
his  house  apparently  on  business,  because  he  afterwards  proved  him- 
self to  be  such.  This,  we  think,  would  be  preposterous.  We  there- 
fore see  no  ground  upon  which  the  defendant  could  be  held  liable 
on  a  note  thus  obtained,  even  to  a  bona  fide  holder  for  value.  He  was 
guilty  of  no  more  negligence  than  the  plaintiff  who  took  the  paper, 


436  holder's  position. 

and  the  plaintiff  shows  no  right  or  equities  superior  to  those  of  the 
defendant. 

Such,  we  think,  must  be  the  result  upon  principle.  We  have  care- 
fully examined  the  cases,  English  and  American,  and  are  satisfied 
there  is  no  adjudged  case  in  the  English  courts,  so  far  as  their 
reports  have  reached  us,  which  would  warrant  a  recovery  in  the 
present  case.  Some  dicta  may  be  found  the  general  language  of 
which  might  sustain  the  liability  of  the  maker;  such  as  that  of 
Alderson,  B.,  in  Marston  v.  Allen,  8  Mees.  &  W.  494,  cited  by  Duer, 
J.,  in  Gould  v.  Segee,  5  Duer,  260,  and  that  used  by  Williams,  J.,  in 
Ingham  v.  Primrose,  7  C.  B.  n.  s.  82.  But  a  reference  to  the  cases 
will  show  that  no  such  question  was  involved,  and  that  these  remarks 
were  wholly  outside  of  the  case.  On  the  other  hand  Hall  v.  Wilson, 
16  Barb.  548,  555,  and  556,  contains  a  dictum  fully  sustaining  the 
views  we  have  taken. 

There  are,  however,  two  recent  American  cases  where  the  note  or 
indorsement  was  obtained  without  delivery  under  circumstances  quite 
as  wrongful  as  those  in  the  present  case,  in  one  of  which  the  maker, 
and  in  the  other  the  indorser,  was  held  liable  to  a  bona  fide  holder  for 
value.  Shipley  v.  Carroll,  45  111.  285  (case  of  maker),  and  Gould  v. 
Segee,  5  Duer,  260.  But  in  neither  of  these  cases  can  we  discover 
that  the  court  discussed  or  considered  the  real  principle  involved; 
and  we  have  been  unable  to  discover  anything  in  the  cases  cited  by 
the  court  to  warrant  the  decision.  It  is  possible  that  the  case  in 
Illinois  may  depend  somewhat  upon  their  statute,  and  the  note  being 
made  as  a  mere  matter  of  amusement,  and  the  making  not  being 
justified  by  any  legitimate  pending  business,  the  maker  might  per- 
haps justly  be  held  responsible  for  a  higher  degree  of  diligence,  and 
therefore  more  justly  chargeable  with  negligence  under  the  particu- 
lar circumstances,  than  the  maker  in  the  present  case. 

There  is  another  case  (Worcester  Co.  Bank  v.  Dorchester  and  Mil- 
ton Bank,  10  Cush.  488)  where  bank-bills  were  stolen  from  the  vault 
of  the  bank,  which,  though  signed  and  ready  for  use,  had  never  yet 
been  issued,  and  on  which  a  bona  fide  holder  for  value  was  held  en- 
titled to  recover.  This,  we  are  inclined  to  think,  was  correct.  The 
court  intimated  a  doubt  whether  the  same  rule  should  apply  to  bank- 
bills  as  to  ordinary  promissory  notes,  and  as  to  the  latter  failed  to 
make  any  distinction  between  the  question  of  delivery  and  questions 
affecting  the  rights  of  the  parties  upon  notes  which  have  become 
effectual  by  delivery  But  we  think  bank-bills,  which  circulate  uni- 
versally as  cash,  passing  from  hand  to  hand  perhaps  a  hundred  times 
a  day,  without  such  inquiries  as  are  usual  in  the  cases  of  ordinary 
promissory  notes  of  individuals,  stand  upon  quite  different  grounds. 
And  considering  the  temptations  to  burglars  and  robbers,  and  the 
much  greater  facility  of  passing  them  off  to  innocent  parties  without 
detection  and  identification  of  the  bills  or  the  parties,  and  that  the 


WORRALL  V.    GHEEN.  437 

special  business  of  banks  is  dealing  in  and  holding  the  custody  of 
money  and  bank-bills,  it  is  not  unreasonable  to  hold  them  to  a  much 
higher  degree  of  care,  and  to  make  them  absolutely  responsible  for 
their  safe  keeping.  We  do  not  therefore  regard  this  case  as  having 
any  material  bearing  upon  the  case  before  us. 

We  think  the  Circuit  Court  erred  in  refusing  to  charge  upon  this 
point  as  requested  by  the  defendant  below. 

[Concerning  want  of  stamp  and  "other  minor  questions"  not 
considered.] 

The  judgment  must  be  reversed  with  costs,  and  a 

New  trial  awarded. 


WOERALL   V.    GHEEK. 

Supreme  Court  of  Pennsylvania,  1861.     39  Penn.  State,  388. 

If  a  negotiable  instrument  is  materially  altered  after  delivery,  a  bona  fide  holder 
may  recover  thereon,  according  to  its  original  tenor.^ 

Assumpsit  by  the  holder  against  the  first  indorser  of  a  negotiable 
promissory  note.    The  following  special  verdict  was  rendered : 

"  Charles  M.  Layman  filled  up  a  printed  blank  note  in  the  follow- 
ing manner  and  in  the  following  terms.  The  annexed  is  a  correct 
copy  as  it  was  executed  by  him : 

$50.  October  14,  1857. 

Thirty  days  after  date,  I  promise  to  pay  to  the  order  of  Levi  A. 
Gheen,  at  the  Bank  of  Chester  County, 

fifty  TtTtr  Dollars,  without  defalcation,  for  value 

received. 

Credit  the  drawer,  C.  M.  Layman". 

Levi  A.  Gheen. 

Layman  called  upon  Gheen  with  the  note,  and  requested  him  to 
indorse  it.  Gheen  did  so,  by  writing  his  name  across  the  back  of  the 
note,  and  signed  his  name  under  the  words  '  Credit  the  drawer.'  Lay- 
man then  took  the  note  away  and  fraudulently  altered  its  amount 
from  fifty  dollars  to  one  hundred  and  fifty  dollars,  by  adding  the 
figure  '  1 '  between  the  $  and  the  figure  '  50,'  and  the  words  '  One 
hundred  & '  before  the  word  *  fifty.' 

The  fraud  was  so  well  executed  that  the  appearance  of  the  note 
was  not  such  as  to  excite  the  suspicions  of  a  man  in  ordinary  business. 
On  inspection  a  difference  in  the  color  of  the  ink  with  which  the 
words  '  One  hundred  & '  were  written  may  be  perceived." 

1  N.  I.  L.  §  141.     C£.  Holmes  v.  Trumpet,  post,  p.  444, 


438  holder's  position. 

The  plaintiff  discounted  the  note  before  maturity  for  value  and 
without  knowledge  of  the  alteration,  and  without  notice  thereof 
further  than  the  foregoing  facts  indicate.  Due  steps  were  taken  to 
fix  the  defendant's  liability  as  indorser. 

Judgment  below  ordered  for  the  defendant;  the  plaintiff  sued  out 
a  writ  of  error. 

[Argument  reported.] 

LowRiE,  C.  J.  We  are  not  able  to  follow  the  cases  of  Pagan  v. 
"Wylie  and  Graham  v.  Gillespie,  Eoss  on  Bills  and  Notes,  194,  195, 
in  the  principal  point  decided  there.  And  yet  we  would  not  be  under- 
stood as  denying  the  case  of  Young  v.  Grote  in  the  same  book,  p.  187, 
4  Bing.  253.  It  may  be  that  a  cheque  on  a  banker,  so  written  as  to 
be  easily  altered  by  the  bearer  of  it,  ought  to  be  treated  in  the  same 
manner  as  instructions  sent  by  a  principal  to  his  agent,  wherein  the 
latter  is  not  allowed  to  suffer  from  the  carelessness  of  the  former.^ 
Thus  probably  alterations  in  cheques  may  be  properly  distinguished 
from  those  in  bills,  notes,  and  other  contracts.    We  doubt  it,  however. 

This  is  a  case  of  a  printed  form  of  a  promissory'  note,  filled  up  by 
the  maker,  and  then  indorsed  for  his  accommodation  by  another,  and 
then  altered  by  the  maker  to  a  larger  sum  by  taking  advantage  of 
some  vacant  space  left  in  the  form.  If  the  sum  had  been  left  en- 
tirely blank,  the  inference  would  have  been  that  the  parties  author- 
ized the  holder  as  their  agent  in  filling  it  in,  and  they  would  have 
been  bound  accordingly.  But  where  a  sum  is  actually  written,  we 
can  make  no  such  inference  from  the  fact  that  there  is  room  to  write 
more.  This  fact  shows  carelessness;  but  it  was  not  the  carelessness 
of  the  indorser,  but  the  forgery  of  the  maker,  that  was  the  proximate 
cause  that  misled  the  holder.  And  we  know  not  how  we  can  say 
that  a  man  be  chargeable  with  a  contract  because  he  did  not  use 
proper  precaution  in  guarding  against  forgery  in  any  of  the  thousand 
forms  it  may  take.  We  know  of  no  way  of  saving  purchasers  of 
negotiable  paper  from  the  necessity  and  the  consequences  of  relying 
on  the  character  of  the  man  they  buy  it  from,  if  they  do  not  take  the 
trouble  of  inquiring  of  the  original  parties. 

But  this  plaintiff  had  no  hand  in  the  alteration,  and,  as  this  is  a 
case  stated,  we  are  not  met  by  any  discrepancy  of  allegata  and  pro- 
hata,  and  therefore  we  can  give  judgment  for  the  true  amount  of  the 
note.2  Eoss  on  Bills  and  Notes,  201.  This  brings  the  case  within 
the  Hundred  Dollar  Act,  and  therefore  the  judgment  must  be  without 
costs. 

Judgment  for  plaintiff  for  $60.37^. 

1  See  Scholfield  v.  Earl  of  Londesborongh, /)os<,  pp.  452,  453.        '  N.  I.  L.  §  141. 


ALDOUS   V.   COKNWELL.  439 

ALDOUS   V.    COENWELL. 

Queen's  Bench  of  England,  Trinity,  1868.    L.  R.  3  Q.  B.  573. 

An  alteration  expressing  only  the  effect  in  law  of  the  instrument  as  it  stood  before 
is  not  a  material  alteration.*^ 

Declaration  that  the  defendant,  on  the  8th  of  November,  1865, 
by  his  promissory  note,  promised  to  pay  the  plaintiff  £125  on  demand. 
Plea,  that  the  defendant  did  not  make  the  note  as  alleged. 

At  the  trial  the  following  promissory  note,  signed  by  the  defendant, 
was  put  in  evidence : 

"  November  8th,  1865. 

On  demand. 

I  promise  to  pay  Mr.  Ed.  Aldous  the  sum  of  £125." 

But  it  was  proved  that  the  promissory  note,  when  delivered  to  the 
plaintiff,  did  not  contain  the  words  "  On  demand,"  and  that  these 
words  had  been  inserted  while  the  note  was  in  the  possession  of  the 
plaintiff,  the  payee,  without  the  knowledge  of  the  defendant,  but  there 
was  no  positive  evidence  to  show  by  whom  the  alteration  was  made. 
The  learned  judge  directed  a  verdict  for  the  plaintiff,  reserving  leave 
to  move  to  enter  a  verdict  for  the  defendant,  if  the  note  was  made 
void  by  the  alteration.    Eule  obtained  accordingly. 

[Argument  reported.] 

Lush,  J.  This  was  an  action  by  the  payee  against  the  maker  of  a 
promissory  note,  expressed  to  be  payable  on  demand.  The  plea  denied 
the  making  of  the  note. 

At  the  trial  before  the  late  Mr.  Justice  Shee  it  was  proved  that  the 
words  "  on  demand  "  were  added  after  the  note  had  been  delivered 
to  the  plaintiff.  It  did  not  appear  who  made  the  alteration,  but  it 
was  assumed  to  have  been  made  by  the  plaintiff,  and  no  question  was 
raised  as  to  this  fact.  The  learned  judge  directed  a  verdict  for  the 
plaintiff,  reserving  the  point  whether  by  such  an  alteration  the  note 
was  rendered  void.  No  objection  having  been  made  to  the  pleadings, 
we  must  consider  the  case  as  if  the  question  had  been  properly  raised 
on  the  record. 

It  was  admitted,  and  properly  so,  on  the  argument,  that  the  addi- 
tion of  these  words  did  not  alter  the  legal  effect  of  the  instrument, 
but  only  expressed  what  the  law  would  otherwise  have  implied.  But 
it  was  contended,  upon  the  authority  of  Pigot's  Case,  11  Eep.  36  &, 
and  Master  v.  Miller,  4  T.  E.  320,  1  Sm.  L.  C.  796,  that  the  altera- 
tion, having  been  made  by  the  payee  and  holder,  though  in  a  matter 
not  material,  avoided  the  instrument. 

1  As  to  what  alterations  are  material,  see  N.  I.  L.  §  142 ;  Bigelow,  Bills  and  Notes, 
207-210. 


440  holder's  position. 

In  Pigot's  Case  it  is  said,  "  If  the  obligee  himself  alters  the  deed 
by  any  of  the  said  ways  (viz.  by  interlineation,  addition,  erasing,  or 
by  drawing  a  pen  through  the  line,  etc.),  although  it  is  in  words  not 
material,  yet  the  deed  is  void ;  but  if  a  stranger,  without  his  privity, 
alters  the  deed  by  any  of  the  said  ways  in  any  point  not  material,  it 
shall  not  avoid  the  deed."  For  this  proposition  Dyer,  9  Eliz.  fol. 
361  h,  is  cited.  Shep.  Touch,  vol.  1,  p.  68,  is  to  the  same  effect.  It 
was  found  as  a  fact  in  Pigot's  Case  that  the  alteration,  which  was 
not  a  material  one,  was  made  by  a  stranger,  and  judgment  was  given 
for  the  plaintiff,  so  that  the  case  itself  is  not  a  decision  upon  the 
point  in  question.  Master  v.  Miller  extended  the  doctrine,  as  regards 
material  alterations,  to  bills  of  exchange;  and  subsequent  cases  have 
applied  it  indiscriminately  to  all  written  instruments,  whether  under 
seal  or  not.  See  Davidson  v.  Cooper,  11  Mees.  &  W.  778 ;  in  error,  13 
'  *Iees.  &  W.  343.  No  authority  was  cited,  nor  are  we  able  to  find  one, 
in  which  the  doctrine  has  been  acted  upon  and  an  instrument  held  to 
,'  be  avoided  by  an  immaterial  alteration.  There  are  cases  to  the  con- 
trary, though  we  cannot  regard  them  as  entirely  satisfactory.  Thus, 
in  Lord  Darcy  and  Sharpe's  Case,  1  Leon.,  an  alteration  in  a  bond 
not  material,  made  by  the  executor  of  the  obligee,  was  held  not  to 
vitiate  the  bond.  But  the  court  seemed  to  lay  stress  on  the  fact  that 
the  alteration  was  in  favor  of  the  obligor. 

In  Sanderson  v.  Symonds,  1  Ball  &  B.  426,  the  holder  of  a  policy 
of  insurance  on  a  ship,  on  a  voyage  to  the  coast  of  Africa,  during  her 
stay  there,  and  back  to  Liverpool,  with  liberty  to  "  touch  and  stay  at 
any  port  or  places  to  sell,  barter,  and  exchange,  and  load  and  unload 
and  reload  at  any  of  the  ports  and  places  she  may  call  at,"  had,  fear- 
ing that  these  words  might  not  be  sufficiently  extensive  for  his  pur- 
pose, added  after  the  words  "  during  her  stay  "  the  words  "  to  trade." 
Several  of  the  underwriters  had  initialed  the  alteration,  but  the  de- 
fendant refused  to  do  so,  on  the  ground  that  he  never  underwrote 
trading  policies  to  Africa,  and  he  offered  before  the  loss  to  cancel  his 
subscription  and  return  the  premium  rather  than  assent  to  such  an 
alteration.  The  plaintiff  refused  to  accept  this  offer,  and  held  to  the 
policy.  The  ship  was  afterwards  lost,  and  the  plaintiff  sued  the 
defendant  for  his  subscription;  the  defendant  resisted  the  action  on 
the  ground  that  the  alteration  avoided  the  policy  so  far  as  he  was 
concerned.  It  is  to  be  observed  here  that  both  parties  thought  the 
alteration  material  at  the  time  it  was  made.  The  court,  however, 
held  that  the  words  so  added  expressed  no  more  than  was  already 
contained  in  the  policy  as  signed  by  the  defendant,  and  therefore  that 
the  defendant  was  not  discharged.  This  case  might  have  been  cited 
as  conclusive  upon  the  question  before  us  but  for  the  reasons  assigned 
by  the  different  members  of  the  court  for  their  judgment.  Dallas, 
C.  J.,  said  that  the  rule  was  intended  not  so  much  to  guard  against 
fraud  as  to  insure  the  identity  of  the  instrument  and  prevent  the  sub- 


ALDOUS   V.   CORN  WELL.  441 

stitution  of  another  without  the  privity  of  the  party  concerned. 
"  But  the  present  case/'  he  said,  "  stands  on  its  own  circumstances. 
The  instrument  is  a  policy  of  insurance  signed  by  a  number  of  in- 
dividuals wholly  unconnected  in  interest,  and  between  whom  no 
privity  can  exist.  Indeed,  it  has  never  been  contended  that  this  was 
an  alteration  without  the  privity  of  the  party ;  and  the  old  cases  turn 
entirely  on  alteration  made  without  the  privity  of  the  party.  Here 
the  instrument  was  shown  to  all  the  parties  concerned.  Those  who 
put  their  initials  to  the  alteration  thereby  expressly  signified  their 
consent  to  it ;  those  who  refused  to  do  so  expressed  their  denial  by  the 
absence  of  their  initials.  But  the  latter  were  bound  by  the  policy  as 
it  stood  at  first,  the  former  by  the  policy  in  its  altered  state." 
Park,  J.,  said,  "  In  all  the  cases  on  policies  the  court  refers  to  the 
materiality  of  the  alterations.  The  alteration  here  is  immaterial ;  the 
risk  stands  as  it  stood  before,  and  the  writing  immaterial  words  does 
not  vacate  the  policy."  And  Burrough  and  Eichardson,  JJ.,  base 
their  judgment  on  the  fact  that  the  risk  was  not  varied  by  the 
alteration. 

Had  the  alteration  in  that  case  been  a  material  one,  the  fact  that 
some  of  the  underwriters  had  assented  to  it,  and  that  it  had  been 
shown  to  those  who  refused  ^  their  assent,  would  not  have  prevented 
the  operation  of  the  rule  as  against  the  latter.  This  had  been  decided 
in  two  prior  cases  in  the  same  court,  Langhorn  v.  Cologan  ^  and  Fair- 
lie  V.  Christie,^  in  each  of  which  the  dissentient  underwriters  had 
been  held  to  be  discharged  by  a  material  alteration  in  the  policy, 
though  they  had  been  asked  to  join  others  who  had  assented  and  had 
refused  to  do  so.  The  judgment  of  Dallas,  C.  J.,  cannot  therefore 
stand  upon  that  ground,  and  it  is  obvious  the  real  ground  of  the 
decision  in  Sanderson  v.  Symonds  was  that  the  defendant  was  not 
and  could  not  be  prejudiced  by  the  alteration.  Why  the  court  should 
have  limited  the  doctrine  they  there  laid  down  to  policies  of  insur- 
ance it  is  not  easy  to  understand.  We  cannot  discover  any  reason  for 
making  a  distinction  between  that  and  any  other  species  of  contract. 

Another  case  is  that  of  Catton  v.  Simpson,  8  Ad.  &  E.  136 ;  there 
the  plaintiff  had  joined  the  defendant  as  his  surety  in  a  joint  and 
several  promissory  note.  The  payee,  having  pressed  the  defendant 
for  payment,  had  consented  to  give  time  on  his  procuring  a  third 
person  to  add  his  name  to  the  note.  The  plaintiff,  who  had  after- 
wards paid  a  moiety  of  the  amount,  sued  the  defendant  for  re-pay- 
ment, and  it  was  objected  that,  as  the  name  of  the  third  party  had 
been  added  without  the  plaintiff's  consent,  he  had  been  discharged 
and  had  paid  the  money  in  his  own  wrong.  Patteson,  J.,  who  tried 
the  cause,  directed  a  verdict  for  the  plaintiff;  and  the  court  refused 
a  rule  for  a  new  trial,  holding  "  that  it  was  not  an  alteration  of  the 

1  Printed  "  expressed,"  but  corrected  in  "  Erratum  "  of  the  volume. 

2  4  Taunt.  330.  *  7  Taunt.  416. 


442  holder's  position, 

note,  but  an  addition  which  had  no  effect."  It  is  true  that  in  the 
subsequent  case  of  Gardner  v.  Walsh,  5  El.  &  B.  83,  this  court  ex- 
pressly overruled  Catton  v.  Simpson,  not  however  on  the  ground  that 
an  immaterial  alteration  vacated  the  instrument,  but  on  the  ground 
that  the  alteration  was  a  material  one. 

This  being  the  state  of  the  authorities,  we  think  we  are  not  bound 
by  the  doctrine  in  Pigot's  Case  or  the  authority  cited  for  it;  and  not 
being  bound,  we  are  certainly  not  disposed  to  lay  it  down  as  a  rule 
of  law  that  the  addition  of  words  which  cannot  possibly  prejudice 
any  one  destroys  the  validity  of  the  note.  It  seems  to  us  repugnant  to 
justice  and  common-sense  to  hold  that  the  maker  of  a  promissory  note 
is  discharged  from  his  obligation  to  pay  it  because  the  holder  has  put 
in  writing  on  the  note  what  the  law  would  have  supplied  if  the  words 
had  not  been  written.    We  therefore  discharge  the  rule. 

Rule  discharged. 


BROWN   V.   EEED. 
Supreme  Court  of  Pennsylvania,  November,  1875.     79  Penn.  State,  370. 

But  the  bona  fide  holder  may  be  entitled  to  recover  ou  the  instrument  as  altered,  if 
the  alteration  was  the  result  of  the  negligence  of  the  promisor. 

Assumpsit  by  the  holder  against  the  maker  of  a  promissory  note 
in  the  following  form : 

North  East,  April  3d,  1872. 

Six  months  after  date  I  promise  to  pay  to  J.  B.  Smith  or 
order  Two  Hundred  and  Fifty  Dollars 
for  value  received,  with  legal  interest  without 
defalcation  or  stay  of  execution. 

T.  H.  Brown. 

Endorsed :  *^  J.  B.  Smith,  without  recourse." 

The  plaintiff  produced  the  note  in  evidence,  and  testified  that  he 
purchased  it  before  maturity,  in  good  faith,  paying  $220  therefor. 

The  defendant  offered  to  prove  that  he  did  not  execute  the  instru- 
ment in  the  form  now  sued  on;  that  he  did  enter  into  a  contract 
with  one  J.  B.  Smith,  to  act  as  agent  in  selling  "  Hay  and  Harvest 
Grinders  " ;  that  the  contract  so  executed  was,  in  form,  as  follows : 

North  East,  April  3d,  1872. 

Six  months  after  date  I  promise  to  pay  J.  B.  Smith  or  •  bearer  fifty  dollars  when  I  sell  by 
order  Two  Hundred  and  Fifty  Dollars  worth  of  Hay  and  Harvest  Grinders, 
for  value  received,  with  legal  interest,  without  appeal,  and  also  without 
defalcation  or  stay  of  execution. 

T.  H.  Brown,  •  Agent  for  Hay  and  Harvest  Grinders. 

That,  further,  the  contract  had  been  altered  since  he  signed  it, 
by  cutting  it  in  such  a  way  as  to  leave  the  instrument  in  suit. 
[The  instrument  was  cut  on  a  line  connecting  the  asterisks.] 


BROWN  V.   REED.  443 

The  plaintiff  objected  to  the  admission  of  this  evidence,  on  the 
ground  that  it  would  constitute  no  bar  to  his  right  to  recover. 

The  evidence  was  excluded,  and  the  judge  ordered  a  verdict  for  the 
plaintiff.    The  defendant  excepted  to  the  exclusion  of  the  evidence. 

[Argument  not  reported.] 

Sharswood,  J,  The  learned  counsel  for  the  plaintiff  in  error  has 
appealed  to  us  to  reconsider  and  overrule  Phelan  v.  Moss,  17  P.  F. 
Smith,  59;  and  Garrard  v.  Haddan,  17  P.  F.  Smith,  82;  since 
followed  in  Zimmerman  v.  Bote,  25  P.  F.  Smith,  188.  We  mean,  how- 
ever, to  adhere  to  those  cases,  as  founded  both  on  reason  and  author- 
ity, and  as  settling  a  principle  of  the  utmost  importance  in  the  law  of 
negotiable  securities.  That  principle  is  that,  if  the  maker  of  a  bill, 
note,  or  cheque  issues  it  in  such  a  condition  that  it  may  be  easily  al- 
tered without  detection,  he  is  liable  to  a  bona  fide  holder  who  takes  it 
in  the  usual  course  of  business,  before  maturity.  The  maker  ought 
surely  not  to  be  discharged  from  his  obligation  by  reason  or  on 
account  of  his  own  negligence  in  executing  and  issuing  a  note  that  in- 
vited tampering  with.  These  cases  did  not  decide  that  the  maker 
would  be  l30und  to  a  bona  fide  holder  on  a  note  fraudulently  altered, 
however  skilful  that  alteration  might  be,  provided  that  he  had  himself 
used  ordinary  care  and  precaution.  He  would  no  more  be  responsible 
upon  such  an  altered  instrument  than  he  would  upon  a  skilful  for- 
gery of  his  handwriting.  The  principle  to  which  I  have  adverted  is 
well  expressed  in  the  opinion  of  the  court  in  Zimmerman  v.  Eote, 
25  P.  F.  Smith,  191 :  "  It  is  the  duty  of  the  maker  of  the  note  to 
guard  not  only  himself  but  the  public  against  frauds  and  alterations 
by  refusing  to  sign  negotiable  paper  made  in  such  a  form  as  to  admit 
of  fraudulent  practices  upon  them,  with  ease  and  without  ready 
detection."  ^ 

But  would  the  facts  offered  to  be  given  in  evidence  and  rejected 
by  the  court  below,  have  brought  this  case  within  the  line  of  their 
decisions  ?  We  think  not.  In  Phelan  v.  Moss  and  in  Zimmerman  v. 
Eote,  the  party  signed  a  perfect  promissory  note,  on  the  margin  or 
underneath  which  was  written  a  condition  which  as  between  the  par- 
ties was  a  part  of  the  contract  and  destroyed  its  negotiability.  But 
it  could  easily  be  separated,  leaving  the  note  perfect,  and  no  one 
would  have  any  reason  to  suspect  that  it  had  ever  existed.  In  Garrard 
V.  Haddan,  the  note  was  executed  with  a  blank,  by  which  the  amount 
might  be  increased,  without  any  score  to  guard  against  such  an 
alteration.  In  all  these  cases  the  defendants  put  their  names  to  what 
were  on  their  face  promissory  negotiable  notes.  In  the  case  before 
us  on  the  defendant's  offer,  he  did  not  sign  a  promissory  note,  but 
a  contract  by  which  he  was  to  become  an  agent  for  the  sale  of  a 

1  But  see  Holmes  v.  Trnmper,  post,  p.  444 ;  and  Scholfield  v.  Earl  of  Londesborongh, 
post,  p.  449. 


444  holder's  position. 

washing  machine.  It  was  indeed  so  cunningly  framed  that  it  might 
be  cut  in  two  parts,  one  of  which  with  the  maker's  name  would  then  be 
a  perfect  negotiable  note.  Whether  there  was  negligence  in  the  maker 
was  clearly  a  question  of  fact  for  the  jury.  The  line  of  demarcation 
between  the  two  parts  might  have  been  so  clear  and  distinct  and 
given  the  instrument  so  unusual  an  appearance  as  ought  to  have 
arrested  the  attention  of  any  prudent  man.  But  it  may  have  been 
otherwise.  If  there  was  no  negligence  in  the  maker,  the  good  faith 
and  absence  of  negligence  on  the  part  of  the  holder  cannot  avail  him. 
The  alteration  was  a  forgery,  and  there  was  nothing  to  estop  the 
maker  from  alleging  and  proving  it.  The  ink  of  a  writing  may  be 
extracted  by  a  chemical  process,  so  that  it  is  impossible  for  any  but 
an  expert  to  detect  it,  but  surely  in  such  a  case  it  cannot  be  pretended 
that  the  holder  can  rely  upon  his  good  faith  and  diligence.  We  think 
then  that  the  evidence  offered  by  the  defendant  below  should  have 
been  received. 

Judgment  reversed  and  venire  facias  de  novo  awarded. 

Note.  —  If  this  case  can  be  reconciled  with  Worrall  v.  Gheen,  ante,  p.  437, 
it  must  be  upon  the  ground  that,  in  the  latter  case,  there  either  was  no  negli- 
gence, or  the  negligence  was  not  the  proximate  cause  of  the  loss  to  the  holder. 
If  there  was  negligence  in  executing  the  contract  in  Brown  v.  Reed,  that  is,  if 
the  contract  was  drawn  in  such  a  way  that  a  prudent  man  ought  to  have  seen 
its  unusual  appearance,  and  refrained  from  signing  it  in  that  form,  then  there 
was  something  more  than  making  forgery  easy;  this  is  not  "  facilitating  alter- 
ation," but  is  making  a  contract  by  negligence.  See  Scholfield  v.  Earl  of 
Londesborough,  posi,  p.  449,  as  to  the  doctrine  of  facilitating  alteration. 


HOLMES   V.    TEUMPER. 

Supreme  Court  of  Michigan,  April,  1871.     22  Mich.  427. 

It  is  not  negligence,  however,  to  leave  blank  spaces  in  the  instrument,  even  though 
the  alteration  is  facilitated  thereby.  In  some  jurisdictions,  a  material  alteration  de- 
stroys the  instrument  even  in  the  hands  of  a  bona  fide  holder.  ^ 

The  case  is  stated  in  the  opinion. 

[Argument  reported.] 

Christiancy,  J.  This  was  an  action  brought  by  Holmes  against 
Trumper  upon  a  promissory  note  signed  by  the  latter,  which  note 
was  partly  printed  and  partly  in  writing,  a  printed  blank  having  been 
used.  The  following  is  a  copy  of  the  body  of  the  note  as  it  appeared 
upon  the  trial,  the  portions  in  italics  being  printed  and  the  other 
portions  written,  viz. : 

1  See  also  Wood  v.  Steele,  6  Wall.  80.    Bat  see  N.  I.  L.  §  141. 


HOLMES  V.   TRUMPER.  445 

"  $400. 

One  year  after  date  I  promise  to  pay  to  Lyman  Terry  or  hearer, 
four  hundred  dollars,  at  the  First  National  Bank  of  Ann  Arbor, 
value  received,  with  interest  at  10  per  cent.  [signed]  Jacob 
Trumper." 

There  was  evidence  on  the  part  of  the  defendant  tending  to  show 
that  the  note  had  been  altered  after  it  was  made  and  delivered  to 
the  paj'ee  by  adding,  after  the  printed  word  "  at,"  in  the  last  line, 
the  figures  and  words  ''  10  per  cent,"  and  (as  is  to  be  fairly  inferred 
from  the  whole  record  and  the  argument,  though  not  expressly 
stated),  that  this  alteration  was  made  without  the  knowledge  or 
consent  of  the  maker. 

It  was  conceded  on  the  trial  that  the  plaintiff  was  a  bona  fide 
holder  of  the  note  before  due,  and  the  only  question  in  the  case  is 
whether  the  wrongful  alteration  of  the  note  by  the  payee  or  any  sub- 
sequent holder  (for  such  was  the  only  inference,  there  being  no 
evidence  showing  by  whom  the  alteration  was  made)  rendered  the 
note  void  in  the  hands  of  the  plaintiff,  or  constituted  a  defence  as 
against  him  in  favor  of  the  maker. 

Without  extrinsic  evidence  of  authority  to  make  the  alteration, 
it  is  too  clear  to  require  the  citation  of  authorities,  that  unless  the 
note,  as  signed,  can  be  treated  as  a  note  given  in  blank,  so  far  as 
relates  to  the  rate  of  interest,  giving  the  payee  or  holder  the  right 
to  fill  the  blank  by  inserting  the  rate,  the  alteration  must  be  treated 
as  a  forgery,  since  it  is  one  which,  if  valid,  would  enlarge  the  liability 
of  the  maker. 

We  are  entirely  satisfied  that  this  note  when  signed  without  the 
addition  of  the  words  "10  per  cent "  was,  notwithstanding  the  word 
"at,"  in  legal  effect,  a  complete  and  valid  note,  drawing  the  legal 
rate  of  interest  at  seven  per  cent ;  and  that  the  word  "  at,"  at  the 
end  of  the  printed  form,  might  readily  be  overlooked  by  the  signer, 
or  disregarded  as  of  no  consequence  if  noticed  at  all ;  and  that  there 
was,  therefore,  no  such  blank  left  in  it  as  would  warrant  the  payee 
or  holder,  without  further  evidence  of  assent,  to  insert  a  different 
rate  of  interest.  See  Warrington  v.  Early,  2  Ellis  &  Blackb.  763; 
Waterman  v.  Vose,  43  Maine,  504. 

But  in  the  case  before  us  the  insertion  of  the  words  "10  per  cent," 
at  the  end  of  the  note  after  the  single  printed  word  "  at,"  can  hardly 
be  called  the  filling  a  blank  at  all ;  and  though  it  is  urged  that  leav- 
ing the  printed  word  "  at "  at  the  close  of  the  note  was  calculated 
to  facilitate  the  forgery,  by  inducing  in  other  parties  the  belief  of 
tbe  genuineness  of  the  words  added,  yet  it  may  be  said  with  at  least 
equal  force,  on  the  other  hand,  that  to  those  looking  at  the  note  after 
the  alteration  critically  enough  to  notice  the  printed  word  "  at,"  the 


446  holder's  position. 

printed  form  of  the  note  itself  might  well  excite  suspicion  that  the 
form  was  specially  got  up  by  the  payee  to  render  the  forgery  more 
easy,  and  that  the  words  "  10  per  cent,"  added  at  the  end,  were  rather 
calculated  to  increase  than  to  allay  the  suspicion  of  their  genuine- 
ness; since,  if  the  note  was  got  up  and  printed  only  with  the  inten- 
tion of  leaving  a  blank  for  the  insertion  of  the  rate,  the  words,  "  per 
cent,"  might  just  as  well,  and  much  more  naturally  would  have  been, 
printed  after  a  small  blank  following  the  word  "  at."  Even  the 
name  of  the  payee  was  printed  in  the  note.  Would  the  payee,  in 
honestly  getting  up  such  a  note,  have  it  printed  without  printing 
also  the  words  "per  cent,"  which  would  in  all  cases  be  the  same, 
whatever  the  rate?  These  considerations  are  not  conclusive,  it  is 
true,  but  they  are  not  without  weight. 

We  think  the  courts  have  gone  quite  far  enough  in  sustaining 
instruments  executed  in  blank,  and  the  implied  authority  to  fill  them 
up,  and  we  are  not  disposed  to  take  a  step  in  advance  in  that  direction. 

The  counsel  for  the  plaintiff  in  error  fully  admits  the  general 
rule,  that  an  alteration  having  this  effect  thus  to  increase  the  maker's 
liability,  renders  the  note  void  as  against  the  maker,  even  in  the 
hands  of  a  bona  fide  holder  for  value.^  But  he  insists  that,  though  it 
may  be  a  forgery,  the  peculiar  facts  of  this  case  bring  it  within  a 
principle  which  constitutes  an  exception  to  the  general  rule;  that 
the  maker  was  guilty  of  negligence  in  leaving  a  blank  apparently 
intended  for  the  insertion  of  the  rate  per  cent  unfilled,  and  without 
drawing  a  line  through  the  blank  or  erasing  the  word  "  at,"  to  in- 
dicate that  it  was  not  to  be  filled,  and  that  he  thereby  invited  and 
facilitated  the  forgery  in  a  manner  calculated  to  impose  upon  inno- 
cent parties,  and  that  he  must  therefore,  as  between  him  and  such 
innocent  parties,  be  held  to  pay  the  note,  in  its  altered  form,  in  the 
same  manner  as  if  it  had  been  originally  so  drawn,  on  the  principle 
that,  "  where  one  of  two  innocent  parties  must  suffer  by  the  fault 
of  a  third,  he  shall  sustain  the  loss  who  put  it  in  the  power  of  the 
third  to  occasion  it";  or,  as  expressed  by  the  Louisiana  court,  in 
Isnard  v.  Torres  et  al.,  10  La.  An.  103 :  "  Where  one  of  two  parties, 
neither  of  whom  has  acted  dishonestly,  must  suffer,  he  shall  suffer 
who,  by  his  own  act,  has  occasioned  the  confidence  and  consequent 
injury  of  the  other." 

This  principle  is  one  of  quite  general  application,  and  where 
properly  understood  and  limited,  it  is  one  of  manifest  equity;  but 
it  has  many  limitations  and  qualifications.  Whether  the  present  case 
falls  within  it  or  constitutes  an  exception  is  a  question  of  some  nicety, 
requiring  considerable  accuracy  of  discrimination  for  its  solution, 
and  upon  which  unanimity  of  decision  could  perhaps  hardly  be  ex- 
pected; and  we  accordingly  find  that  able  courts  have  arrived  at 
opposite  conclusions  upon  it.  But,  upon  principle  and  the  weight 
1  But  see  Worrall  v.  Gheen,  ante,  p.  437 ;  N.  I.  L.  §  141. 


HOLMES   V.   TRUMPER.  447 

of  authority,  we  think  the  liability  of  the  maker  upon  the  note,  as 
altered,  cannot  be  maintained. 

•  •••••••• 

As  between  the  maker  of  commercial  paper  and  an  innocent  party 
acting  upon  the  faith  of  the  paper,  which  the  maker  has  voluntarily 
and  intentionally  executed  and  even  negligently  allowed  to  go  out 
of  his  hands  and  to  get  into  circulation,  the  general  principle  we  are 
discussing  would  preclude  such  maker  from  showing  that  the  paper 
was  not  intended  to  have  the  effect  which  its  appearance  indicated, 
though,  as  between  the  original  parties,  many  things  might  be  shown 
to  defeat  it.  It  is  substantially  a  representation  upon  which  he  has 
authorized  innocent  parties  to  act;  and  when  they  have  thus  acted 
he  must  be  held  by  the  contract  indicated  by  the  representation  thus 
made. 

But  this  reasoning  extends  only  to  the  paper  as  made  and  issued 
by  him,  or  as  he  has  thereby  authorized  some  other  person  to  change 
its  terms ;  and  the  note  in  this  case  being  a  complete  legal  instrument 
when  issued,  to  hold  him  bound  by  the  contract,  as  altered  by  the 
forgery,  involves  the  idea  that  the  person  committing  the  forgery 
was  his  agent  in  committing  it  (a  ludicrous  absurdity),  or  at  least 
that  he  had  authorized  innocent  third  parties  so  to  treat  him. 

Upon  the  hypothesis  of  the  plaintiff  in  error  which  we  are  now 
considering,  it  is  not  claimed,  nor  in  view  of  the  facts  as  disclosed 
by  the  record  can  it  be  claimed,  that  the  person  making  the  altera- 
tion had  any  authority,  nor  that  the  maker  had  done  or  omitted 
anything  to  induce  the  belief,  that  he  had  authorized  any  subsequent 
holder  to  make  it,  nor  that  it  was  made  by  any  person  standing  in 
any  confidential  relation  to  or  held  out  as  such  by  him.  The  whole 
argument  goes  upon  the  assumption  that  the  plaintiff  took  the  note 
in  ignorance  that  any  alteration  had  been  made.  The  argument 
amounts  simply  to  this :  That  by  the  maker's  awkwardness  or  negli- 
gence his  note  was  issued  by  him  in  a  shape  which  rendered  it  some- 
what easier  for  another  person  to  commit  a  crime  than  if  he  had 
taken  the  precaution  to  erase  the  word  "  at,"  and  to  draw  a  line 
through  the  blank  which  followed  it;  and  that  a  forgery  committed 
by  filling  this  blank  would  be  less  likely  to  excite  suspicion  than  if 
committed  in  some  other  way. 

But  how  such  a  crime,  whether  committed  in  this  or  in  any  other 
way,  could  create  a  contract  on  the  part  of  the  maker  we  confess 
ourselves  unable  to  comprehend;  nor  are  we  satisfied  that  a  for- 
gery committed  in  this  way  would  be  any  less  liable  to  detection  than 
if  committed  in  many  other  ways.  The  negligence,  if  such  it  can  be 
called,  is  of  the  same  kind  as  might  be  claimed  if  any  man,  in  sign- 
ing a  contract,  were  to  place  his  name  far  enough  below  the  instru- 
ment to  permit  another  line  to  be  written  above  his  name  in  apparent 
harmony  with  the  rest  of  the  instrument;    or,  as  if  an  instrument 


448  holder's  positiok. 

were  written  with  ink,  the  material  of  which  would  admit  of  easy 
and  complete  obliteration  or  fading  out  by  some  chemical  applica- 
tion which  would  not  affect  the  face  of  the  paper,  or  by  failing  to  fill 
any  blank  at  the  end  of  any  line  which  might  happen  to  end  far 
enough  from  the  side  of  the  page  to  admit  the  insertion  of  a  word. 
The  law  has  no  scale  by  which  to  measure  the  various  degrees  of 
facility  with  which  different  modes  of  forgery  may  be  committed,  or 
their  liability  to  suspicion  or  detection;  and  we  see  no  clear  and 
intelligible  distinction  by  which  we  could  hold  the  maker  in  this 
case  bound  by  this  forgery,  which  would  not  hold  all  persons  liable 
for  the  alteration  and  forgery  of  any  paper  signed  by  them.  When- 
ever a  party  in  good  faith  signs  a  complete  promissory  note,  however 
awkwardly  drawn,  he  should,  we  think,  be  equally  protected  from 
its  alteration  by  forgery  in  whatever  mode  it  may  be  accomplished; 
and  unless,  perhaps,  when  it  has  been  committed  by  some  one  in 
whom  he  has  authorized  others  to  place  confidence  as  acting  for  him, 
he  has  quite  as  good  a  right  to  rest  upon  the  presumption  that  it  will 
not  be  criminally  altered  as  any  person  has  to  take  the  paper  on  the 
presumption  that  it  has  not  been ;  and  the  parties  taking  such  paper 
must  be  considered  as  taking  it  upon  their  own  risk,  so  far  as  the  ques- 
tion of  forgery  is  concerned,  and  as  trusting  to  the  character  and  credit 
of  those  from  whom  they  receive  it,  and  of  the  intermediate  holders. 

If  promissory  notes  were  only  given  by  first-class  business  men 
who  are  skilful  in  drawing  them  up  in  the  best  possible  manner  to 
prevent  forgery,  it  might  be  well  to  adopt  the  high  standard  of  ac- 
curacy and  perfection  which  the  argument  in  behalf  of  the  plaintiff 
in  error  would  require.  But  for  the  great  mass  of  the  people  who 
are  not  thus  skilful,  nor  in  the  habit  of  frequently  drawing  or 
executing  such  paper,  such  a  standard  would  be  altogether  too  high, 
and  would  place  the  great  majority  of  men,  of  even  fair  education 
and  competency  for  business,  at  the  mercy  of  knaves,  and  tend  to 
encourage  forgery  by  the  protection  it  would  give  to  forged  paper. 

We  have  thus  far  considered  the  question  involved  as  one  of  prin- 
ciple alone;  and,  though  the  authorities  are  not  uniform,  there  is, 
we  think,  a  very  decided  preponderance  in  favor  of  the  conclusion 
at  which  we  have  arrived. 

We  see  no  ground  upon  which  the  defendant  below  could  be  held 
to  pay  the  amount  of  the  note,  as  originally  drawn,  at  least  when  the 
action  is  brought  upon  the  note  itself,  without  departing  from  the 
whole  theory  upon  which,  at  common  law,  the  defence  rests,  which  is 
that  the  paper,  by  the  alteration  or  forgery,  is  rendered  void,  and 
does  not  constitute  a  contract  in  any  respect. 

There  was  no  error  in  the  ruling  of  the  Circuit  Court,  and  the 
judsimcnt  must  be  affirmed  with  costs. 

The  other  justices  concurred. 


SCHOLFIELD   V.   EARL   OF   LONDESBOROUGH.  449 

SCHOLFIELD   v.   EAEL   OF   LOJ^DESBOROUGH. 

House  of  Lords  of  England,  1896.     1896,  A.  C.  514. 

For  example,  the  acceptor  of  a  bill  of  exchange,  is  not  negligent  in  acceptiLg  a 
complete  bill  which  contains  blank  spaces  which  may  easily  be  fiUed,  thereby  alter- 
ing the  instrument,  and  if  the  bill  is  altered  after  acceptance,  a  bona  fide,  holder  can 
recover  only  according  to  its  original  tenor. 

The  case  is  stated  in  the  opinion. 
[Argument  reported.] 

Lord  Watson.  My  Lords,  the  appellant,  who  is  the  onerous  holder 
of  a  bill  of  exchange  purporting  to  be  for  £3500,  seeks  in  this  suit  to 
recover  that  sum  from  the  respondent. 

The  appellant  brought  an  action  against  the  respondent  upon 
a  bill  of  exchange  purporting  to  be  for  £3500,  payable  three  months 
after  date.  The  bill  was  written  out  by  Scott  Sanders,  the  drawer, 
for  the  sum  of  £500,  on  a  £3  stamp;  and,  in  that  condition,  was 
presented  by  him  to  the  repondent,  who  accepted  it.  After  accept- 
ance, the  drawer  fraudulently  increased  its  amount  by  inserting  the 
figure  "  3  "  between  the  letter  "  £  "  and  the  figures '"  500,"  in  the 
corner  of  the  bill,  by  writing  the  word  "  three  "  at  the  end  of  the  sec- 
ond line,  and  by  writing  the  word  "  thousand "  at  the  beginning 
of  the  third  line  before  the  words  "  five  hundred "  in  the  body  of 
the  bill.  It  is  now  obvious  that  Scott  Sanders,  when  he  wrote  the 
bill,  must  have  had  in  contemplation  the  alterations  which  he  sub- 
sequently made,  and  that  he  purposely  used  a  stamp  of  unnecessary 
value,  and  left  the  spaces  which  he  afterwards  filled  up  as  above 
described,  in  order  to  facilitate  his  fraud.  The  altered  bill  was  in- 
dorsed by  Scott  Sanders  to  one  Scott,  from  whom  the  appellant 
acquired  it  in  good  faith  and  for  value.  In  his  defence  to  the  action, 
the  respondent,  while  denying  all  liability,  paid  into  court  the 
original  amount  of  £500.^ 

[The  judgment  was  for  the  defendant  in  the  Court  of  Queen's 
Bench  (1894,  2  Q.  B.  660).  This  decision  was  affirmed  by  the 
majority  of  the  Court  of  Appeal  (Lord  Esher,  M.  E.,  and  Eigby, 
L.  J.,  Lopes,  L.  J.,  dissenting)  upon  other  grounds.  [1895]  1  Q.  B. 
536.    From  these  decisions  the  plaintiff  brought  the  present  appeal.] 

The  case  was  tried  before  Charles,  J.,  upon  the  facts  already 
stated,  with  these  further  admissions  made  by  the  appellant:  (1) 
That  the  respondent  was  ignorant  of  bill  transactions;  (2)  that  he 
knew  nothing  about  the  stamp  laws;    and   (3)    that  he  had  good 

1  See  Bills  of  Exchange  Act,  §  64,  1. 
29 


450  holder's  position. 

reason  to  place  implicit  confidence  in  the  honesty  of  Scott  Sanders. 
With  regard  to  the  first  and  second  of  these  admissions,  I  must  ob- 
serve that,  in  my  opinion,  ignorance  of  bill  transactions  or  of  the 
stamp  laws  will  not,  in  a  question  with  an  onerous  and  bona  fide 
holder,  absolve  persons  who,  notwithstanding  their  ignorance,  choose 
to  engage  in  such  transactions  from  the  fulfilment  of  any  duty  or 
obligation  which  the  law  imposes  upon  the  parties  to  a  bill  of  ex- 
change. The  reasonable  belief  of  the  respondent  in  the  honesty  of 
the  person  by  whom  the  bill  was  drawn  and  presented  to  him  for 
acceptance  might,  if  he  was  under  a  legal  duty  to  take  precautions 
against  its  fraudulent  alteration,  be  an  element  of  importance  in 
considering  whether,  as  matter  of  fact,  he  acted  negligently,  as  the 
appellant  alleges. 

The  appellant  did  not  maintain  that  the  respondent  either  directly 
authorized,  or  meant  to  authorize,  Scott  Sanders  to  alter  the  amount 
of  the  bill.  Nor  did  he  maintain  that  the  respondent  had  by  his 
subsequent  conduct  homologated  or  adopted  the  alteration.  He  con- 
tended that  the  law  merchant  imposes  upon  every  person  who  either 
draws  or  accepts  a  bill  of  exchange  with  a  view  to  its  circulation 
the  duty  of  taking  reasonable  precautions,  in  order  to  prevent  the 
possibility  of  its  amount  being  fraudulently  increased;  that  the 
respondent  negligently  failed  to  perform  that  duty,  inasmuch  as  he 
accepted  a  bill  written  upon  a  stamp  sufficient  to  cover  the  altered 
amount,  and  having  spaces  left  blank  in  the  writing  which  enabled 
the  drawer  to  fill  them  up  in  such  a  manner  as  to  effect  and  at  the 
same  time  to  conceal  his  fraud;  and  that,  by  reason  of  such  negli- 
gence, the  respondent  is  estopped  from  denying  his  liability  for  the 
full  amount  of  £3500  appearing  on  the  face  of  the  bill. 

Charles,  J.,  who  appears  to  have  relied  upon  the  authority  of 
Young  V.  Grote,  4  Bing.  253,  held  in  point  of  law  that,  if  the  acceptor 
of  a  bill  of  exchange  "  signs  it  negligently  in  such  a  shape  as  to 
render  alteration  a  likely  result,  he  is  responsible  on  the  altered 
instrument."  Upon  the  facts  of  the  case  the  learned  judge  came  to 
the  conclusion  that  the  respondent  had  not  been  guilty  of  negligence ; 
but  in  respect  that  the  alteration  of  the  bill  was  not  apparent,  he 
found  that  the  appellant  was  entitled  to  the  money  which  had  been 
paid  into  court,  and  entered  judgment  for  the  respondent.  His 
decision  was  affirmed,  but  not  upon  the  same  grounds,  by  a  ma- 
jority of  the  Court  of  Appeal.  The  Master  of  the  EoUs  and  Rigby, 
L.  J.,  were  of  opinion  that,  although  the  rule  contended  for  by  the 
appellant  might  prevail  as  between  a  customer  and  his  banker,  it  was 
not  applicable  according  to  English  law  as  between  the  acceptor  of 
a  bill  of  exchange  and  subsequent  holders.  Their  Lordships  were 
further  of  opinion  that  the  rule,  assuming  it  to  have  previously 
existed,  was  abolished  by  §  64  of  the  Bills  of  Exchange  Act,  1882. 
Lopes,  L.  J.,  dissented,  being  of  opinion  that  the  principle  of  Young 


SCHOLFIELD   V.   EARL   OF  LONDESBOEOUGH.  451 

V.  Grote,  4  Bing.  253,  applied  as  between  the  acceptor  and  an  in- 
dorsee acquiring  right  to  the  bill  after  his  acceptance ;  and  his  Lord- 
ship also,  dift'ering  from  Charles,  J.,  held  that  the  respondent  had 
been  negligent,  and  that  the  appellant  ought,  therefore,  to  have 
judgment  for  the  full  amount  of  the  bill  as  fraudulently  altered. 

In  these  circumstances  it  becomes  necessary  to  examine  the  author- 
ities which  were  noticed  by  the  learned  judges  or  were  cited  in  the 
able  argument  addressed  to  us  on  behalf  of  the  appellant.  Such  of 
these  authorities  as  really  bear  upon  the  doctrine  propounded  by 
the  appellant  are  few  in  number.  Of  the  rest,  some  have  a  very 
distant  relation  to  it;  whilst  others  are  irrelevant. 

The  basis  of  the  appellant's  argument  is  to  be  found  in  Young 
V.  Grote,  4  Bing.  253.  In  that  case  the  customer  of  a  bank  signed 
several  blank  cheques  and  gave  them  to  his  wife,  to  be  tilled  up  and 
negotiated  by  her  as  she  required.  In  one  of  these  the  sum  of  £50 
was  inserted,  in  her  presence  and  at  her  request,  by  a  clerk,  to  whom 
she  then  gave  the  cheque  in  order  that  he  might  get  the  money  for 
her.  In  writing  the  sum  the  clerk  had  left  spaces  with  fraudulent 
intent,  so  as  to  enable  him  to  increase  the  amount  to  £350,  which  was 
paid  to  him  by  the  banker.  Best,  C.  J.,  and  three  other  learned 
judges  of  the  King's  Bench  held,  in  these  circumstances,  that  the 
banker  was  entitled  to  take  credit,  in  account  with  his  customer,  for 
the  full  amount  which  he  had  paid  upon  the  cheque. 

The  doctrine  laid  down  by  Pothier  {Traite  du  Contrat  de  change. 
Chap.  IV.,  Art.  III.,  §  99)  was  referred  to  with  approval  by  some 
of  the  learned  judges.  In  that  passage  the  author  deals  with  the 
mutual  rights  and  obligations  arising  out  of  the  contract  of  mandate 
which  subsists  between  a  banker  and  the  mandant  whose  cheques  or 
orders  he  has  undertaken  to  pay.  He  notices  the  rule  of  the  Roman 
Law,  which  had  been  followed  by  Scacchia,  to  the  effect  that  "  man- 
dator debet  refundere  mandatorio  quicquid  ei  inculpabiliter  abest  ex 
causa  mandati."  According  to  that  rule,  the  customer  would  be 
liable  for  the  amount  of  a  fraudulently  altered  cheque  in  every  case 
where  the  banker  could  not  have  detected  the  alteration  by  the  ex- 
ercise of  reasonable  care.  Pothier  qualifies  the  rule,  and  in  so  far 
favors  the  customer,  by  limiting  his  liability  to  those  cases  in  which 
his  own  negligence  in  drawing  the  cheque  has  given  the  opportunity 
for  its  alteration. 

The  reported  opinions  of  the  learned  judges  leave  it  doubtful 
whether  their  decision  in  Young  v.  Grote,  4  Bing.  253,  went  upon 
the  doctrine  of  Pothier,  or  upon  the  ground  that  the  customer  by 
signing  a  blank  cheque  had  undertaken  liability  for  any  sum  which 
might  be  filled  in  before  it  was  presented  for  pa}Tnent.  I  think  the 
Lord  Chancellor  (Cranworth)  must  have  had  the  first  of  these 
grounds  in  view  when  he  said,  in  Bank  of  Ireland  v.  Trustees  of 
Evans's  Charities,  5  H.  L.  C.  at  p.  413  :  "  Now,  the  case  of  Young  v. 


452  holder's  position. 

Grote,  4  Bing.  253,  went  upon  that  ground  (whether  correctly  ar- 
rived at  in  point  of  fact  is  immaterial)  that  the  plaintiff  there  was 
estopped  from  saying  that  he  did  not  sign  the  cheque  for  £350 ;  and  if 
the  circumstances  are  such,  whether  arising  from  negligence  or  from 
any  other  cause,  that,  as  between  the  customer  and  his  banker,  the 
customer  is  estopped  from  saying  that  he  did  not  sign  the  cheque 
for  a  particular  amount,  that  as  between  them  is  just  the  same  as 
if  he  had  signed  it."  On  the  other  hand,  Lord  Wensleydale  (then 
Parke,  B.),  when  delivering  the  opinion  of  seven  judges  of  the  Ex- 
chequer Chamber  in  Robarts  v.  Tucker,  16  Q.  B.  560,  indicates  that 
Young  V.  Grote,  4  Bing.  253,  was  decided  upon  the  second  ground. 
After  referring  to  the  facts  of  the  case,  he  observed :  "  This  was  in 
truth  considering  that  that  customer  had,  by  signing  a  blank  cheque, 
given  authority  to  the  person  in  whose  hands  it  was  to  fill  up  the 
cheque  in  whatever  way  the  blank  permitted."  ^ 

Guardians  of  Halifax  Union  v.  Wheelwright,  L.  R.  10  Ex.  183, 
appears  to  me  to  be  a  decision  in  entire  conformity  with  the  doctrine 
of  Pothier.  The  guardians  were  in  the  habit  of  passing  orders  upon 
their  treasurer,  who  was  local  agent  of  the  bank  in  which  their 
money  was  deposited.  Some  of  these  orders  written  by  their  clerk, 
and  thereafter  signed  by  the  guardians,  were  drawn  by  the  clerk 
in  such  a  way  that  he  was  enabled  to  increase  their  amounts  before 
he  presented  them  for  payment.  The  court  held  that  the  treasurer 
was  in  the  same  position  as  if  he  had  been  their  banker;  and 
that  the  guardians  were  estopped,  by  their  negligent  drawing  of 
the  orders,  from  maintaining  that  he  had  not  their  authority  to  pay 
the  full  amount  of  these  orders,  as  fraudulently  increased. 

In  my  opinion.  Young  v.  Grote,  4  Bing.  253,  can  have  no  bearing 
upon  the  present  case,  if  it  was  decided  upon  the  ground  that  the 
customer,  by  signing  a  blank  cheque,  had  given  implied  authority 
to  fill  it  up  to  any  subsequent  holder.  Whoever  signs  a  cheque  or 
accepts  a  bill  in  blank,  and  then  puts  in  into  circulation,  must  neces- 
sarily intend  that  either  the  person  to  whom  he  gives  it,  or  some 
future  holder,  shall  fill  up  the  blank  which  he  has  left.  No  such 
inference  would  be  reasonable  in  the  case  where  the  drawer  or  acceptor 
signs  for  a  particular  sum  specified  on  the  face  of  the  document.  If, 
on  the  other  hand,  the  decision  in  Young  v.  Grote,  4  Bing.  253,  was 
based  upon  the  ratio  that  the  customer,  in  filling  up  the  cheque 
through  his  wife,  whom  he  had  constituted  his  agent  for  that  purpose, 
had  failed  in  the  duty  which  he  owed  to  his  banker  by  giving  facil- 
ities for  its  fraudulent  alteration,  I  am  not  prepared  to  affirm  that 
it  cannot  be  supported  by  authority.  But  it  does  not,  in  my  opinion, 
necessarily  follow  that  the  same  rule  must  be  applied  between  the 
acceptor  of  a  bill  of  exchange  and  a  holder  acquiring  right  to  it  after 
acceptance.    The  duty  of  the  customer  arises  directly  out  of  the  con- 

1  Cf.  N.  I.  L.  §  31. 


SCHOLFIELD   V.   EARL   OF   LONDESBOROUGH.  453 

tractual  relation  existing  at  the  time  between  him  and  the  banker, 
who  is  his  mandatory.  There  is  no  such  connection  between  the 
drawer  or  acceptor  and  possible  future  indorsees  of  a  bill  of  exchange. 

The  duty  which  the  appellant's  argument  assigns  to  an  acceptor 
is  towards  the  public,  or,  what  is  much  the  same  thing,  towards  those 
members  of  the  public  who  may  happen  to  acquire  right  to  the  bill, 
after  it  has  been  criminally  tampered  with.  Apart  from  authority, 
I  do  not  think  the  imposition  of  such  a  duty  can  be  justified  on  any 
sound  legal  principle.  In  many  if  not  most  cases  which  occur  in 
the  course  of  business,  the  bill  is  written  out  by  the  drawer,  and  sent 
by  him  to  the  acceptor,  who  is  under  an  obligation  to  sign  it.  Assum- 
ing the  appellant's  argument  to  be  well  founded,  it  would  be  within 
the  right  of  the  acceptor  to  return  the  bill  unsigned,  if  it  were  not 
drawn  so  as  to  exclude  all  reasonable  possibilities  of  fraud  or  forgery. 
The  exercise  of  that  right  might  lead  to  very  serious  complications 
in  commercial  transactions.  Besides,  it  is  not  consistent  with  the 
general  spirit  of  the  law  to  hold  innocent  persons  responsible  for  not 
taking  measures  to  prevent  the  commission  of  a  crime  which  they 
may  have  no  reason  to  anticipate;  although  there  may  be  an  excep- 
tion in  the  case  where  one  of  the  parties  to  the  instrument  has,  either 
by  express  agreement  or  by  implication  established  in  the  law,  be- 
come bound  to  use  such  precautions.  I  am  therefore  unwilling  in  the 
case  of  an  acceptor  to  affirm  the  doctrine  upon  which  the  appellant 
relies,  unless  it  can  be  shown  to  be  established  by  authority  as  part 
of  the  English  law  merchant. 

I  shall  briefly  refer  to  four  decisions,  because  they  were  either 
cited  in  argument,  or  have  been  discussed,  in  this  or  similar  cases  by 
the  courts  below.  All  of  these  cases  related  to  bills  of  exchange; 
but  in  none  of  them  had  there  been  any  alteration  of  the  amount  for 
which  the  acceptor  signed. 

[After  discussing  briefly  the  cases  of  Ingham  v.  Primrose,  7  C.  B. 
N.  s.  82 ;  Arnold  v.  Cheque  Bank,  1  C.  P.  D.  579 ;  and  Baxendale 
V.  Bennett,  3  Q.  B.  D.  525,  his  Lordship  continued:] 

I  shall  now  proceed  to  consider  the  remaining  and  only  English 
authorities  which  appear  to  me  to  be  in  point.  Before  doing  so,  I 
think  it  is  not  immaterial  to  observe  that  Pothier,  who  is  the  real 
author  of  the  doctrine  relied  on  by  the  appellant,  in  the  passage  cited 
by  the  learned  judges  who  decided  Young  v.  Grote,  4  Bing.  253,  only 
applies  it  to  the  case  of  a  banker  and  his  customer.  But  in  Art.  III. 
of  the  same  chapter  of  his  treatise  the  learned  author  discusses  the 
nature  of  the  contract  which  is  constituted  between  the  drawer  and 
the  acceptor  of  a  bill  which  he  asserts  to  be  "  un  vrai  contrat  de 
mandat,  mandatum  solvendce  pecunice."  I  think  it  is  apparent  from 
the  context  of  Art.  III.,  that  the  rule  laid  down  by  Pothier  in  §  99, 
was  meant  by  him  to  apply  not  only  as  between  banker  and  customer. 


454  holdek's  position. 

but  as  between  a  drawer  and  an  acceptor  who  pays  in  compliance 
with  his  drawer's  mandate.  But  the  rule  has  no  application  to  parties 
between  whom  there  is  no  subsisting  contract  of  mandate.  According 
to  its  terms,  an  acceptor,  who  paid  the  full  sum  appearing  upon  the 
face  of  a  bill  which  he  knew  or  had  reason  to  believe  had  been  fraudu- 
lently increased  after  his  acceptance,  would  have  no  right  to  recover 
the  increased  amount  from  his  drawer. 

It  was  argued  that  certain  expressions  used  by  Lord  Blackburn 
(at  that  time  Blackburn,  J.)  in  Swan  v.  North  British  Australasian 
Co.,  2  H.  &  C.  175,  182,  tend  to  show  that  the  rule  which  Pothier 
applies  to  a  customer  who  draws  a  cheque  upon  his  banker  has  appli- 
cation also  as  between  the  acceptor  of  a  bill  and  possible  future 
holders.  His  Lordship  there  said,  with  reference  to  Young  v.  Grote, 
4  Bing.  253,  "  It  may  be  that  the  case  is  to  be  supported  upon  some 
of  the  grounds  there  stated,  or  upon  the  broader  ground  apparently 
supported  by  the  authority  of  Pothier  in  the  passage  cited  in  Young 
V.  Grote,  4  Bing.  253,  that  the  person  putting  in  circulation  a  bill 
of  exchange  does,  by  the  law  merchant,  owe  a  duty  to  all  parties  to 
the  bill  to  take  reasonable  precautions  against  the  possibility  of 
fraudulent  alterations  in  it;  it  is  not  necessary  to  inquire  how  that 
may  be."  Lopes,  L.  J.,  infers  from  these  words  that  "  it  is  impos- 
sible not  to  see  that  in  the  case  of  negotiable  instruments  Blackburn, 
J.,  thought  the  duty  did  exist."  I  am  unable  to  assent  to  that  in- 
ference. The  words  convey  anything  but  a  hearty  approval  of  the 
decision  in  Young  v.  Grote,  4  Bing.  253,  and  at  the  most  they  do 
not  even  amount  to  obiter  dicta.  They  contain  no  expression  of 
judicial  opinion,  and  do  nothing  more  than  state  the  tenor  of  an 
argument  which  the  noble  and  learned  Lord  had  not  found  it  neces- 
sary to  consider.  One  thing  seems  certain,  namely,  that  his  Lord- 
ship had  not  examined  the  text  of  Pothier,  which  contains  no  such 
doctrine  as  his  words  impute. 

Several  points  were  raised  for  the  decision  of  the  Court  of  Common 
Pleas  in  Societe  Generale  v.  Metropolitan  Bank,  Limited,  27  L.  T. 
849,  and  one  of  these  came  very  near  to  the  question  which  your 
Lordships  have  to  consider  in  this  case.  The  time  of  payment  of  a 
bill  of  exchange  had,  after  issue,  been  fraudulently  altered  from  eight 
to  eighty  days  after  date.  The  alteration  being  material,  it  was 
sought  to  make  the  indorser  liable,  upon  the  ground  that  he  had 
negligently  left  a  vacant  space  in  the  bill,  between  the  words  "  eight " 
and  "  days,"  which  enabled  a  fraudulent  holder  to  add  the  letter 
"  y "  without  risk  of  the  fraud  being  detected  upon  inspection  of 
the  document.  The  court,  consisting  of  Bovill,  C.  J.,  with  Keating 
and  Brett,  JJ.,  came  to  the  conclusion  that  the  indorser  was  not 
liable.  None  of  the  learned  judges  affirmed  that  there  was  any  duty 
incumbent  upon  the  indorser  to  take  precautions  against  forgery; 
but,  on  that  assumption,  they  all  held  that  there  had  been  no  negli- 


SCHOLFIELD    V.    EAKL   OF  LONDESBOROUGH.  455 

gence.  Two  of  them  used  language  which  does  not  appear  to  me  to 
be  consistent  with  the  existence  of  such  a  duty.  The  Chief  Justice 
observed :  "  Persons  are  not  to  be  supposed  to  commit  forgery,  and 
the  protection  against  such  a  crime  is  the  law  of  the  land,  not  the 
vigilance  of  parties  in  excluding  all  possibility  of  committing  it." 
The  present  Master  of  the  Eolls  said :  "  I  not  only  protest  that  there 
was  no  negligence,  but  say  that  no  judge  ought  to  leave  to  a  jury 
that  fact  as  evidence  of  negligence.  But  there  is  no  duty  on  any 
one  to  suppose  that  those  against  whose  character  there  is  no  impu- 
tation will  commit  forgery  whenever  the  opportunity  occurs."  ^ 

The  next  and  the  last  of  the  English  authorities  which  raised  the 
same  questions  of  law  and  fact  which  occur  in  this  appeal  is  Adelphi 
Bank  v.  Edwards,  not  reported,  decided  in  the  year  1882.  The  case 
has  not  been  reported ;  but  in  the  course  of  the  argument  your  Lord- 
ships had  the  advantage  of  considering  the  shorthand  writer's  notes 
of  the  opinions  delivered  by  the  learned  judges,  both  in  the  Court  of 
First  Instance  and  in  the  Court  of  Appeal.  From  these  it  appears 
that  the  defendant  Edwards  had  accepted  a  bill  for  £22  lOs.^  which 
was  written  on  a  stamp  sufficient  to  cover  £300.  Spaces  were  left  in 
the  writing,  which  enabled  a  fraudulent  holder  to  increase  the  amount 
of  the  bill  to  £223  10s.  by  inserting  the  figure  "  2  "  between  the 
letter  "  £  "  and  the  figures  "  22  "  in  the  corner  of  the  bill,  and  by 
adding  the  words  "  two  hundred "  at  the  end  of  one  line,  and  the 
word  "  and "  at  the  beginning  of  the  next.  The  plaintiff  bank, 
having  paid  the  increased  amount,  sued  the  acceptor,  upon  the  same 
arguments  which  have  been  submitted  to  your  Lordships  on  behalf 
of  the  appellant. 

Chitty,  J.,  before  whom  the  case  was  tried,  was  of  opinion  that, 
upon  the  law  contended  for  by  the  plaintiff,  the  defendant  had  not 
been  guilty  of  negligence.  At  the  same  time,  the  learned  judge  did 
not  accept  that  law.  He  said :  "  The  defendant,  in  my  opinion,  as 
a  prudent  man  of  business,  was  not  bound  to  contemplate  that  the 
bill  was  coming  into  fraudulent  hands,  nor  that  by  the  perpetration 
of  a  crime  it  would  be  altered  in  the  manner  in  which  it  has  been 
altered." 

In  the  Appeal  Court,  the  learned  judges  took  the  same  view  of 
the  facts  as  Chitty,  J.,  but  they  also  negatived  the  existence  of  any 
rule  or  principle  requiring  the  acceptor  of  a  bill  to  exclude  facilities 
for  its  alteration.  Baggallay,  L.  J.,  said :  "  It  seems  to  me  impossible 
to  say  that  there  was  any  duty  on  the  part  of  the  acceptor  of  this  bill 
towards  the  party  who  might  subsequently  become  the  holder  of  the 
bill,  so  to  criticise,  and  so  to  examine  the  bill  before  he  signed,  as 
to  put  it  out  of  the  possibility  of  any  additional  words  being  after- 
wards inserted  in  it."  The  present  Master  of  the  Rolls  (then  Brett, 
L.  J.)  stated  forcibly  the  same  opinions,  which  he  has  expressed  in 
1  Cf.  Sbepard  Lumber  Co.  v.  Eldridge,  171  Mass.  516,  528. 


456  holder's  position. 

stronger  langw<age  and  at  greater  length  in  this  case.  Lindley,  L.  J., 
after  referring  to  Young  v.  Grote,  4  Bing.  253,  and  "  that  class  of 
cases,"  proceeded  thus :  "  We  cannot  say  there  was  negligence  here, 
unless  we  go  the  whole  length  of  saying  that  it  is  negligence  to  sign 
a  negotiable  instrument  so  that  somebody  else  can  tamper  with  it. 
I  cannot  go  that  length.  I  think  it  would  be  wrong.  There  is  no 
authority  which  compels  us  to  do  anything  of  the  sort." 

The  result  of  the  English  authorities  is,  in  my  opinion,  decidedly 
adverse  to  the  appellant.  Before  the  present  action  was  brought,  the 
rule  for  which  he  contends  had,  so  far  as  I  have  been  able  to  find, 
never  been  enforced  in  an  English  court  or  affirmed  by  an  English 
judge.  On  the  contrary,  it  had  been  disapproved  by  Bovill,  C.  J., 
and  the  present  Master  of  the  Rolls  in  Societe  Generale  v.  Metro- 
politan Bank,  27  L.  T.  849;  and  the  case  of  Adelphi  Bank  v. 
Edwards,  not  reported,  in  which  four  judges  were  unanimous,  is  a 
direct  precedent  against  it.  It  is,  no  doubt,  within  the  competency  of 
this  House  to  overrule  the  decision  in  Adelphi  Bank  v.  Edwards 
(not  reported),  but  I  see  no  reason  why  your  Lordships  should  do  so. 
The  doctrine  of  Pothier,  out  of  which  the  contention  of  the  bill- 
holder  in  this  and  previous  litigations  has  grown,  is  founded  upon 
reasons  which  have  no  application  to  any  question  between  a  drawer 
or  acceptor  and  a  holder  acquiring  right  to  the  bill  after  acceptance; 
and  I  know  of  no  principle  of  law  which  would  warrant  its  exten- 
sion to  that  case. 

I  desire  to  add  that,  had  your  Lordships  thought  fit  to  accept  the 
legal  argument  of  the  appellant,  I  should  not  have  been  of  opinion 
that  the  claim  which  he  makes  in  this  action  was  excluded  by  §  64  of 
the  Bills  of  Exchange  Act.  That  clause  admits  an  action  for  the  al- 
tered amount  of  the  bill,  when  the  acceptor  has  authorized  the  altera- 
tion. Accordingly,  on  the  supposition  already  made,  if  it  had  been 
shown  that  he  had  failed  to  discharge  his  legal  duty  to  the  appellant, 
the  respondent  would  have  been  estopped  from  saying  that  he  did  not 
authorize  the  fraud  committed  by  Scott  Sanders.  That  estoppel  by 
negligence  would,  in  my  opinion,  have  been  suflBcient  to  establish 
that  the  respondent  had  "  authorized "  the  fraudulent  alteration 
within  the  meaning  of  §  64. 

Por  these  reasons,  I  also  am  of  opinion  that  the  judgment  appealed 
from  ought  to  be  aflBrmed. 

Order  appealed  from  affirmed  and  appeal  dismissed  with  costs. 

Note.  —  See  also  Greenfield  Bank  v.  Stowell,  123  Mass.  196 ;  Bigelow, 
Bills  and  Notes,  277  et  sqq. 


PATON   V.   COIT.  457 

PATON   V.   COIT. 

Supreme  Court  of  Michigan,  October,  1858.     5  Mich.  505. 

There  is  b.  prima  facie  presumption  that  the  holder  is  a  holder  in  due  course;  but 
proof  that  the  title  of  a  prior  party  was  defective  because  of  fraud,  duress,  or  illegality 
pats  the  burden  upon  the  holder  to  show  that  he  is  a  holder  in  due  course.^ 

Assumpsit  against  the  acceptors  of  a  bill  of  exchange  given  for 
intoxicating  liquors  sold  in  violation  of  the  Prohibitory  Liquor  Law, 
which  makes  such  paper  "  utterly  null  and  void  against  all  persons, 
and  in  all  cases,  excepting  only  as  against  the  holders,  .  .  .  who  may 
have  paid  therefor  a  fair  price,  and  received  the  same  upon  a  valu- 
able and  fair  consideration,  without  notice  or  knowledge  of  such 
illegal  consideration."    The  plaintiffs  were  indorsees  of  the  payees. 

On  the  trial,  the  acceptance  having  been  given  in  evidence,  the 
plaintiff  rested.  The  defendant  then  introduced  a  witness,  and  being 
required  to  state  what  he  expected  to  prove  by  such  witness,  stated 
that  he  expected  to  prove  that  such  acceptance  was  given  in  payment 
and  as  security  for  ten  barrels  of  intoxicating  liquor,  called  whiskey, 
purchased  by  defendant,  of  the  drawers  of  said  draft,  on  the  thirtieth 
day  of  March,  1857,  in  Detroit. 

The  plaintiffs  objected  to  such  evidence,  upon  the  ground  that 
under  the  exception  in  section  two  of  the  Prohibitory  Liquor  Law 
of  1855,  the  presumption  was  that  said  draft  was  in  the  hands  of  hona 
fide  holders,  to  wit,  the  plaintiffs;  and  that  the  onus  was  on  the  de- 
fendant to  show,  or  propose  to  show,  notice  before  said  testimony 
could  be  received.  The  court  sustained  the  objection,  and  refused 
to  allow  the  testimony  to  be  given;   and  defendant  excepted. 

Judgment  having  been  rendered  for  plaintiffs  below,  for  the 
amount  of  the  acceptance,  the  defendant  brought  the  case  to  this 
court  by  writ  of  error. 

[Argument  reported.] 

.  Christiancy,  J.  Whether  the  evidence  in  this  case  was  properly 
rejected,  does  not  depend  upon  the  question.  Whether,  standing  alone, 
it  would  have  constituted  a  complete  defence  against  the  draft  in  the 
hands  of  a  hona  fide  holder  for  value;  but.  Whether  it  would  have 
been  sufficient  to  throw  upon  the  plaintiff  the  burden  of  proving  him- 
self to  be  such  hona  fide  holder;  or.  Whether,  in  fact,  the  evidence 
tended,  prima  facie,  to  establish  a  defence. 

It  is  assumed  by  the  counsel  for  the  defendants  in  error  (plain- 
tiffs below)  that  the  only  effect  of  the  statute  in  reference  to  nego- 
tiable paper  given  for  liquors  sold,  "  is  to  render  such  paper  without 
consideration   as  between   the  immediate  parties,"   and  that   "  the 

1  N.  I.  L.  §§  76,  72. 


458  HOLDEUS   POSITION. 

effect  of  the  exception  in  section  two  is  simply  to  put  this  statute 
equity  on  a  footing  with  all  other  equities,  between  the  original 
parties  to  negotiable  paper." 

If  this  be  the  only  effect  of  the  statute,  then,  according  to  the 
prevailing  current  of  recent  decisions,  the  evidence  was  properly 
rejected,  though  the  eases  upon  this  point  are  by  no  means  uniform ; 
and  we  do  not  wish  to  be  understood  as  giving  any  opinion  upon  the 
question  presented  by  this  hypothesis,  as  we  do  not  think  it  involved 
in  the  present  case. 

The  defence  here  proposed  was  not  merely  the  want,  but  the  ille- 
gality of  consideration;  and  this  being  allowed  as  a  defence  between 
the  original  parties,  irrespective  of  and  even  contrary  to  the  equities 
of  the  parties,  cannot,  without  perversion  of  language,  be  called  an 
equity.  It  is  not  on  the  defendants'  account  that  such  a  defence  is 
allowed,  as  will  more  fully  appear  in  the  sequel. 

The  effect  of  the  statute  in  question  is  not  merely  to  render  such 
paper  without  consideration,  but  absolutely  void  and  illegal,  between 
the  immediate  parties,  and  all  others  who  have  not  obtained  it  for 
value,  and  without  notice,  —  not  only  void  in  the  negative  sense  of 
having  no  legal  basis,  but  affirmatively  illegal  as  violating  the  posi- 
tive provisions  of  the  statute.  It  was  not  even  contended  that  the 
facts  offered  to  be  shown  by  the  defendant  would  not  have  made  a 
imma  facie  case  of  an  illegal  sale,  without  showing  that  the  sale 
did  not  come  within  any  of  the  exceptions  of  the  statute ;  and  if  the 
plaintiffs  claimed  to  maintain  the  validity  of  the  sale  under  any  such 
exception,  the  burden  of  proof  (this  being  a  civil  case)  rested  upon 
them  to  bring  it  within  the  exception. 

Now,  upon  principle,  as  a  question  of  statute  construction,  and 
without  reference  to  any  authority,  when  the  statute  expressly  de- 
clares all  such  paper  void  and  illegal,  and  forbids  any  action  to  be 
brought  or  maintained  upon  it,  "  except  when  brought  by  a  hona  fide 
holder  who  has  received  the  same  upon  a  valuable  and  fair  consider- 
ation without  notice  or  knowledge,"  etc.,  it  would  seem  to  follow 
as  a  logical  necessity,  that  when  the  paper  is  shown  to  have  been  given 
for  such  illegal  consideration,  the  plaintiff's  right  of  recovery  is  cut 
off  by  the  general  prohibition  of  the  statute,  unless,  in  avoidance  of 
this,  he  gives  evidence  of  those  facts  which  alone  can  bring  him  within 
the  exception. 

We  do  not  propose  to  give  a  definite  opinion  upon  the  point, 
whether,  the  illegality  being  first  shown,  the  burden  of  proof  in  this 
case  would  have  rested  upon  the  plaintiffs  to  show  actual  want  of 
notice;  this  might  be  requiring  actual  proof  of  a  negative.  But  we 
are  inclined  to  the  opinion  that  they  should  have  shown  the  nature 
of  the  transaction  accompanying  the  transfer;  and  if  that  disclosed 
no  suspicion  of  such  notice,  it  might  make  a  prima  facie  case  of  want 
of  notice,  and  throw  upon  the  defendant  the  burden  of  proving 


PATON  V.  COIT.  459 

notice.  But  the  amount  of  the  consideration  given  by  the  plaintiff 
is  distinct  from  the  question  of  notice,  and  the  absence  of  such  con- 
sideration, in  such  a  case,  would  be  a  defence,  though  the  paper  had 
been  taken  by  the  plaintiff  without  notice.  The  amount  of  consider- 
ation given  by  the  plaintiff  is  an  affirmative  fact  peculiarly  within  his 
own  knowledge,  and  not  generally  in  that  of  the  defendant,  and 
being  necessary  to  bring  the  plaintiff's  case  within  the  exception  of 
the  statute,  should  be  proved  by  him.  To  allow  him  to  recover  with- 
out such  proof  would  be  an  evasion  of  the  statute.  Such  proof  (the 
illegality  being  first  shown)  is  a  necessary  part  of  the  plaintiff's 
case,  without  which  he  shows  no  prima  facie  right  to  recover;  and 
though,  in  ordinary  cases,  this  fact  would  be  presumed  in  favor  of 
the  holder,  this  presumption  can  never  be  allowed  without  proof  when 
the  paper  was  absolutely  void  between  the  original  parties,  on  the 
ground  of  fraud,  illegality,  or  duress. 

This  construction  of  the  statute  is  sustained  by  authority.  In 
England,  by  the  statute  of  Anne,  a  note  or  bill  given  or  indorsed  upon 
a  usurious  consideration  was  void,  even  in  the  hands  of  a  bona  fide 
holder  for  value.  Chitty,  Bills,  9  Am.  ed.,  110.  But  the  Stat.  58 
Geo.  III.  c.  93  made  such  note  valid  in  the  hands  of  a  bona  fide  holder 
for  value  without  notice.  In  the  case  of  Wyat  v.  Campbell,  Mood.  & 
M.  80,  where  the  note  had  been  indorsed  by  a  previous  indorser,  upon 
a  usurious  consideration,  and  no  notice  given  to  plaintiff  to  prove 
consideration,  it  was  contended  that  the  plaintiff  was  not  bound  to 
prove  it.  But,  by  Lord  Tenterden,  C.  J. :  "  The  statute  58  Geo.  III. 
c.  93  makes  a  note  tainted  with  usury  valid  in  the  hands  of  a  bo7ia 
fide  holder.  The  onus  is,  therefore,  upon  the  holder  to  prove  he  is 
such,  otherwise  the  statute  does  not  apply,  and  the  note  is  void  under 
the  statute  of  Anne." 

In  that  case,  it  is  true,  the  exception  was  in  a  subsequent  statute; 
here  it  is  in  the  same  statute ;  but  we  are  unable  to  perceive  how  this 
can  make  any  difference  as  to  the  burden  of  proof.  If  the  fact  was 
not  to  be  presumed  in  that  case,  it  cannot  be  in  this. 

But  whether  this  conclusion  be  right  or  wrong  as  depending  purely 
upon  a  question  of  statute  construction,  can  make  little  difference  in 
this  case.  The  rule  as  to  the  burden  of  proof  is  the  same  upon  prin- 
ciple and  authority  at  common  law.  Whenever  the  consideration  of 
the  paper  between  the  original  parties  has  been  illegal,  especially  if 
in  violation  of  a  positive  prohibition  of  statute,  proof  of  such  ille- 
gality throws  upon  the  holder  the  burden  of  proving  that  he  got  it 
bona  fide,  and  gave  value  for  it.  Northam  v.  Latouche,  4  Car.  &  P. 
140 ;  Bailey  v.  Bidwell,  13  Mees.  &  W.  73 ;  Harvey  v.  Towers,  6 
Exch.  656 ;  Smith  v.  Braine,  16  Q.  B.  201 ;  Fitch  v.  Jones,  32  Eng. 
Law  &  Eq.  134;  Vallet  v.  Parker,  6  Wend.  615;  Edwards,  Bills, 
686,  687;  Chitty,  Bills,  11th  Am.  ed.  661,  662;  Story,  Bills,  §  193. 


460  holder's  position. 

Tlic  rule  is  the  same  as  to  the  burden  of  proof,  where  it  is  shown 
that  the  paper  was  obtained  by  fraud  or  duress,  and  when  stolen,  or 
put  in  circulation  by  fraud.  See  authorities  above  cited,  and  Mills 
V.  Barber,  1  Mees.  &  W,  425 ;  Holme  v.  Karsper,  5  Binn.  469 ;  Aid- 
rich  V.  Warren,  16  Me.  465;  N.  Y.  &  Va.  State  Stock  Bank  v. 
Gibson,  5  Duer,  574.  In  fact,  many  of  the  cases,  and  most  of  the 
elementary  works,  place  illegality  in  the  same  category  with  fraud 
or  duress,  as  casting  the  burden  of  proof  upon  the  holder. 

But,  while  the  result  is  the  same,  it  is  manifest  that  the  basis  of 
the  rule  in  the  case  of  illegality,  though  equally  solid,  is  quite  differ- 
ent. In  the  case  of  duress  and  fraud,  as  well  as  where  the  paper  has 
been  stolen,  the  equities  of  the  defendant  constitute  the  basis  of  the 
rule.  But  in  the  case  of  illegality  of  consideration,  both  parties  are 
generally  equally  in  fault ;  and  it  is  not  to  protect  the  equities  of  the 
defendant,  but  on  broad  grounds  of  public  policy,  —  to  uphold  the 
law,  and  to  discourage  its  violation  or  evasion,  —  that  the  burden  of 
proof  is  cast  upon  the  plaintiff.  It  is  as  much  the  duty  of  courts  to 
discourage  the  violation  or  evasion  of  law  as  to  protect  the  equities 
of  parties.  And  it  is  upon  this  principle  only  that  the  naked  defence 
of  illegality  is  allowed.  See  opinion  of  Lord  Mansfield,  in  Holman  v. 
Johnson,  1  Cowp.  341.  And,  upon  this  principle,  courts  should  be- 
careful  to  avoid  doing  anything  to  facilitate  the  enforcement  of  such 
contracts,  unless  it  appear  affirmatively  that  the  plaintiff  is  not  in 
fault,  and  that  he  has  real  equities  to  be  protected. 

The  evidence  offered  was  improperly  rejected.  The  judgment  must 
be  reversed,  and  a 

New  trial  granted. 

All  the  justices  concurred. 

Note.  — In  Clark  v.  Pease,  ante,  p.  407,  it  was  said,  on  the  question  of  the 
burden  of  proof :  "  When  the  defendant  had  proved  the  duress,  he  had  made  a 
good  defence  as  against  the  original  party;  and  because  of  the  legal  presump- 
tion that  in  such  cases,  the  payee  being  guilty  of  such  illegality  would  dispose 
of  the  note  and  place  it  in  the  hands  of  some  other  person  to  sue  upon  it. 
...  he  had  thereby  cast  a  suspicion  on  the  plaintiff's  title  which  threw  the 
burden  upon  him  of  showing  affirmatively  that  he  was  a  bona  fide  holder 
for  value.  Nor  can  we  see  that  the  fact,  that  this  evidence  was  offered  under 
the  general  issue,  alters  the  position  of  the  parties  or  the  state  of  the  case." 


WHEELER  V.   GUILD.  461 


CHAPTER  XII. 

PAYMENT. 


WHEELEE   V.    GUILD. 

Supreme  Court  of  Massachusetts,  October,  1838.     20  Pick.  545. 

Payment  by  the  maker  before  maturity,  to  the  holder  of  a  negotiable  note  not  en- 
titled to  receive  payment  thereof,  if  not  followed  by  surrender  of  the  note,  will  not 
discharge  the  instrument.^  _ 

The  case  is  stated  in  the  opinion  of  the  court. 
[Argument  reported.] 

Shaw,  C.  J.  The  facts  of  this  case  present  a  very  important  ques- 
tion for  the  consideration  of  the  court.  WTiatever  affects  the  ne- 
gotiability and  the  free  currency  of  promissory  notes  and  bills  of 
exchange  is  of  the  utmost  importance  to  a  mercantile  community,  the 
business  of  which  is  to  a  great  extent  transacted  through  the  medium 
of  these  instruments. 

The  facts  which  may  be  deemed  material  are  these:  The  plaintiff 
became  the  holder  of  the  note  in  question  by  regular  indorsement  for 
valuable  consideration,  soon  after  it  was  made,  being  a  note  dated 
September  1,  1833,  payable  in  three  years,  with  interest,  and  the  last 
indorsement  being  in  blank.  Within  a  year  from  the  date  of  the  note, 
to  wit,  in  March,  1834,  the  plaintiff,  John  Wlieeler,  as  surety,  joined 
with  Daniel  G.  Wheeler  in  three  promissory  notes,  one  to  Brigham 
&  Goodrich,  attorneys  and  partners,  in  Worcester,  one  to  Tappan  & 
Co.,  and  one  to  Stewart  &  Co.,  of  New  York,  for  both  of  which 
parties  Brigham  &  Goodrich  were  agents  and  attorneys.  On  that 
occasion,  the  plaintiff,  John  Wheeler,  delivered  to  Brigham  &  Good- 
rich, as  collateral  security  to  his  three  joint  and  several  promises,  the 
note  in  question,  indorsed  in  blank,  and  took  their  receipt,  specifying 
that  it  was  so  received,  and  to  be  by  them  held,  as  collateral  security 
for  the  payment  of  those  notes.  In  September,  1835,  these  three 
notes  had  been  fully  paid.  Though  Brigham  and  Goodrich  were  in 
partnership  as  attorneys-at-law,  yet  Brigham  was  engaged  in  much 
other  business,  and  had  many  separate  negotiations,  and  the  business 

»  N.  I.  L.  §  136. 


462  PAYMENT. 

in  question  had  been  done  in  the  partnership  name,  but  in  fact  by 
Goodrich.  In  December,  1835,  the  plaintiff  apph'cd  to  Goodrich  for 
the  note,  who  then  produced  and  exhibited  it  from  a  file  of  private 
papers,  where  it  had  been  kept  by  him,  and  he  would  then  have  given 
it  up  to  the  plaintiff,  but  the  plaintiff  had  not  his  receipt  with  him 
to  exchange  for  it.  In  the  mean  time,  before  this  application  of  the 
plaintiff  to  Goodrich,  viz.,  on  the  28th  of  November,  1835,  Brigham 
had  received  of  Stafford,  one  of  the  firm  of  A.  H.  Guild  &  Co.,  and 
one  of  the  defendants,  $500  to  pay  the  note  in  question,  describing 
it  as  a  note  payable  in  September,  1836,  and  gave  him  a  receipt,  in 
his  separate  name,  signed  D.  T,  Brigham,  stating  that  the  $500  had 
been  received  in  full  payment  of  the  note,  and  the  note  to  be  deliv- 
ered up  to  Stafford.  Soon  after  the  application  of  the  plaintiff  to 
Goodrich  above  stated,  viz.,  about  the  24th  of  December,  Stafford, 
one  of  the  defendants,  producing  Brigham's  receipt,  applied  to  Good- 
rich for  the  note,  who  declined  giving  it,  on  the  ground  that  Brigham 
had  no  right  to  receive  pay  for  and  discharge  the  note;  and  by  mu- 
tual consent  it  was  placed  in  the  custody  of  a  gentleman,  for  the  use 
of  the  party  having  the  better  title  to  it,  by  whom  it  was  produced  in 
this  court  on  the  trial. 

Some  inferences  are  to  be  drawn  from  this  evidence,  which  may 
have  a  bearing  on  the  case ;  but  we  think  they  are  plainly  deducible 
from  the  circumstances  stated,  and  they  are  these:  That  Goodrich 
did  not  assent  to  the  payment  received  by  Brigham,  and  did  not  in 
fact  know  of  it  till  after  he  had  been  applied  to  by  the  plaintiff  for 
the  note ;  that  Goodrich  had  the  actual  possession  and  custody  of  the 
note;  and  that,  at  the  time  that  Brigham  received  the  money  and 
gave  the  receipt,  he  not  only  did  not  produce  or  exhibit  the  note,  but 
that  he  had  not  the  actual  custody  of  it,  nor  was  it  so  amongst  the 
partnership  papers  as  that  it  was  in  the  actual  Joint  custody  of  the 
parties  as  partners.  If  he  had  it  in  his  possession,  or  had  regular 
access  to  it  in  the  ordinary  way  of  business,  there  is  no  reason  why 
he  did  not  deliver  it  up  to  Stafford,  instead  of  giving  him  a  receipt, 
and  a  promise  to  deliver  it. 

The  law  in  regard  to  bills  of  exchange  and  promissory  notes  is  so 
framed  as  to  give  confidence  and  security  to  those  who  receive  them 
for  valuable  consideration,  in  the  ordinary  course  of  business,  when 
payable  to  bearer  or  indorsed  in  blank,  so  as  to  be  transferable  by 
delivery;  and  in  general  a  party  taking  such  a  bill  under  such  cir- 
cumstances has  only  to  look  to  the  credit  of  the  parties  to  it,  and  the 
regularity  and  genuineness  of  the  signature  and  indorsements.  So 
that  if  such  a  bill  or  note  be  made  without  consideration,  or  be  lost 
or  stolen,  and  afterwards  be  negotiated  to  one  having  no  knowledge 
of  these  facts,  for  a  valuable  consideration  and  in  the  usual  course  of 
business,  his  title  is  good,  and  he  shall  be  entitled  to  receive  the 
amount.    Miller  v.  Eace,  1  Burr.  452;   Peacock  v.  Khodes,  2  Doug. 


WHEELER  V.   GUILD.  463 

C33;  Grant  v.  Yaughan,  3  Burr.  1516.  The  credit  which  the  law 
thus  attributes  to  notes  and  bills  of  exchange  which  are  transferable 
by  delivery  arises  mainly  from  the  confidence  inspired  by  the  actual 
custody  and  possession,  and  the  actual  delivery  of  the  security  upon 
such  negotiation.  To  so  great  an  extent  is  this  principle  carried,  that 
in  regard  to  bank-notes,  and  in  most  respects  in  regard  to  all  other 
bills  and  notes  transferable  by  deliverA^,  the  title  and  the  possession 
are  considered  to  be  inseparable.  And  it  will  be  presumed  that  the 
party  thus  in  possession  of  a  bill  holds  it  for  value,  until  the  contrary 
appears;  and  the  burden  of  proof  is  on  the  party  impeaching  his 
title.    Collins  v.  Martin,  1  Bos.  &  Pul.  648. 

But  these  rules  are  adopted  with  this  limitation,  that  the  party 
thus  taking  the  note  or  bill  does  it  in  the  ordinary  course  of  trade, 
when  not  overdue  or  otherwise  dishonored  by  anything  apparent  upon 
the  face  of  it,  and  without  notice  that  it  had  been  lost  or  stolen,  or 
that  the  holder  had  obtained  it  wrongfully,  or  had  no  just  right  to 
receive  it  in  the  way  of  business.  Patterson  v.  Hardacre,  4  Taunt. 
114.  If  one  takes  a  note  or  bill  with  actual  notice  that  it  has  been 
lost  by  the  owner,  he  cannot  hold  it  against  the  true  owner.  Lovell 
V.  Martin,  4  Taunt.  799. 

It  has  been  argued  that  where  a  party  has  a  legal  title  by  indorse- 
ment and  delivery,  and  the  actual  possession  of  the  bill  or  note, 
although  he  holds  without  any  just  right  to  negotiate  or  collect  it, 
still,  as  he  has  a  legal  title,  a  transfer  from  him  will  vest  a  legal  title 
in  another,  and  authorize  such  other  to  take  for  his  own  use.  But 
this  consequence,  we  think,  does  not  follow.  The  true  ground  is  ex- 
pressed by  Eyre,  C.  J.,  in  the  case  above  cited,  Collins  v.  Martin. 
.  .  .  The  same  reasoning  applies  to  other  cases,  where  a  party  has  the 
custody  of  a  bill,  without  any  just  right  or  lawful  authority  to  collect 
or  negotiate  it,  as  where  it  has  been  lost  or  stolen,  or  embezzled  from 
the  true  owner,  or  intrusted  to  an  agent,  for  a  special  purpose  only; 
if  these  facts  are  known  to  the  party  receiving  it,  he  is  in  privity  with 
the  party  from  whom  he  receives  it,  and  cannot  be  heard  in  a  court 
of  justice,  though  having  a  legal  title  to  enforce  an  inequitable  and 
unjust  demand.  Such  a  case  is  not  within  the  reason  of  the  rule, 
which  is  designed  only  to  protect  bills  and  notes  when  taken  in  good 
faith,  in  the  course  of  business.  If  a  note  is  paid,  not  in  the  usual 
course  of  business,  or  to  a  person  having  the  custody,  but  not  author- 
ized to  receive  pajonent,  and  that  known  to  the  party  paying,  though 
the  note  be  given  up,  it  is  no  discharge  against  the  true  owner.  King- 
man V.  Pierce,  17  Mass.  247. 

So  payment  of  a  bill  or  cheque,  before  it  is  due,  will  not  be  a  dis- 
charge unless  made  to  the  real  proprietor  of  it ;  and  therefore  where 
a  banker,  contrary  to  usage,  paid  a  cheque  the  day  before  it  bore  date, 
which  had  been  lost  by  the  payee,  it  was  held  that  he  was  liable  to 
repay  the  amount  to  the  person  losing  it.    Da  Silva  v.  Fuller,  Sel. 


464  PAYMENT. 

Cas.  238,  cited  in  Chitty,  Bills,  6th  Eng.  ed.  148.  In  this  case, 
although  the  holder  had  the  legal  title  arising  from  the  possession 
of  the  cheque,  yet  he  was  not  botia  fide  the  holder  with  authority  to 
collect,  and,  as  the  banker  paid  it  out  of  the  usual  course  of  business, 
he  paid  it  at  the  risk  of  being  obliged  to  pay  it  again,  if  the  party 
presenting  it  had  not  just  right  to  receive  it. 

Most  of  the  same  principles  and  reasons  apply  alike  to  transfers 
and  to  payments.  We  think  the  rules  deducible  from  the  cases  are 
these :  Where  a  party  takes  a  bill  transferable  by  delivery,  not  over- 
due nor  otherwise  apparently  dishonored,  for  valuable  consideration, 
in  the  usual  course  of  business,  and  without  notice,  actual  or  con- 
structive, that  the  holder  came  by  it  unlawfully  or  without  title,  and 
has  no  just  right  to  collect  and  receive  it,  the  party  taking  it  shall 
hold  it  as  a  valid  security,  notwithstanding  that  it  has  been  lost  by 
the  true  owner,  or  stolen  from  him,  or  taken  by  the  holder  as  a  mere 
agent  to  keep,  or  for  other  special  purpose,  without  any  authority  to 
collect  or  transfer  it ;  otherwise  he  shall  not  be  deemed  to  have  a  good 
title  to  hold  and  enforce  payment  of  it  or  to  withhold  the  bill  itself 
or  the  proceeds  of  it  from  the  party  justly  entitled.  Bleaden  v. 
Charles,  7  Bing.  246.  The  same  rule  applies  to  payments :  if  a  bill 
be  paid  at  maturity,  in  full,  by  the  acceptor,  or  other  party  liable,  to 
a  person  having  a  legal  title  in  himself  by  indorsement,  and  having 
the  custody  and  possession  of  the  bill  ready  to  surrender,  and  the 
party  paying  has  no  notice  of  any  defect  of  title  or  authority  to  re- 
ceive, the  pa}Tnent  will  be  good.  But  in  both  cases  faith  is  given  to 
the  holder  mainly  on  the  ground  of  his  possession  of  the  bill,  ready 
to  be  surrendered  or  delivered,  and  the  actual  surrender  and  delivery 
of  it  upon  the  payment  or  transfer.  If,  therefore,  upon  such  pay- 
ment, the  holder  has  not  the  actual  possession  of  the  bill  ready  to  be 
delivered,  and  does  not  in  fact  surrender  it,  but  gives  a  receipt  or  other 
evidence  of  the  payment;  and  if  it  turns  out  that  the  party  thus 
receiving  had  not  a  good  right  and  lawful  authority  to  receive  and 
collect  the  money,  but  that  another  person  had  such  right,  the  pay- 
ment will  not  discharge  the  party  paying,  but  will  be  a  payment  in 
his  own  wrong ;  he  must  pay  the  bill  again  to  the  right  owner,  and 
must  seek  his  redress  against  the  party  receiving  his  money,  on  the 
pretence  that  he  had  a  right  to  receive  it  as  the  holder  of  the  bill, 
when  in  fact  he  had  no  such  right. 

Applying  these  principles  to  the  present  case,  the  court  are  of 
opinion  that  the  payment  made  by  Stafford  to  Brigham,  under  the 
circumstances,  did  not  operate  as  a  paj-ment  and  discharge  of  this 
note,  and  that  the  plaintiff  is  entitled  to  recover. 

The  plaintiff  was  the  holder  of  this  note  by  indorsement,  before  it 
was  pledged  to  Brigham  &  Goodrich,  and  had  the  complete  legal  and 
equitable  title  to  it,  and  the  whole  beneficial  interest  in  it.  Being 
transferable  by  delivery,  when  transferred  to  Brigham  &  Goodrich, 


WHEELER  V.    GUILD.  465 

they  took  the  legal  title,  with  a  right  to  collect  it,  and  apply  the  pro- 
ceeds to  the  payment  of  the  notes,  for  the  security  of  which  it  was 
pledged,  if  they  should  not  be  otherwise  paid.  But  when  those  notes 
were  paid,  all  right  of  Brigham  &  Goodrich  to  transfer  or  collect  it 
ceased,  and  they  had  the  mere  naked  possession  of  it  for  the  plaintiff, 
to  be  surrendered  on  demand.  Now  whatever  migiit  have  been  the 
effect  of  an  actual  surrender  and  delivery  of  this  note  to  one  of  the 
promisors,  on  receiving  payment,  it  is  very  clear  that,  according  to  all 
the  rules  applicable  to  this  subject,  without  surrendering  and  deliv- 
ering up  the  note,  the  payment  must  be  considered  as  made  at  the 
risk  of  the  party  paying;  and,  as  the  party  receiving  in  fact  had  no 
right  to  receive  payment,  such  pa3Tnent  and  receipt  did  not  discharge 
the  note,  as  against  the  true  ower.  It  is  not  necessary  to  consider 
whether  Brigham  was  acting  in  his  partnership  capacity  or  not ;  be- 
cause, after  the  purpose  was  accomplished  for  which  the  note  was 
pledged  to  the  partners,  they  had  no  just  right  or  lawful  authority 
to  transfer  or  collect  the  note  as  against  the  plaintiff.  If  they  had 
jointly  transferred  it  in  the  due  course  of  business,  although  their 
transferee  without  notice  might  have  held  it,  it  would  be  in  virtue  of 
the  law  which  protects  such  transfers  to  a  party  without  notice,  in 
order  to  give  effect  to  the  currency  of  bills  and  notes,  and  not  because 
Brigham  &  Goodrich  had  any  right  or  lawful  authority.  If  therefore 
they  had  given  a  transfer  in  writing  with  a  promise  to  deliver  the 
note,  not  delivering  or  producing  it,  no  title  would  have  passed  as 
against  the  plaintiff,  because  such  transfer  without  delivery  would 
not  be  within  the  reason  or  principle  of  the  rule. 

But  we  think  the  other  point  is  equally  decisive.  Brigham  not  only 
did  not  produce  or  exhibit  the  note,  but  he  had  not  the  actual  custody 
or  possession  of  it.  He  did  not  profess  to  act  for  the  partnership, 
but  signed  the  receipt  in  his  own  name.  Had  Brigham  and  Goodrich, 
as  partners,  been  the  true  holders  of  the  note,  or  if  they  had  had  a 
joint  authority  to  collect  it,  it  may  well  be  admitted  that  the  act  of 
one  or  the  receipt  of  one  would  bind  both.  But  all  the  right  and 
authority  which  they  ever  had  over  the  note,  except  to  give  it  back 
to  the  plaintiff,  agreeably  to  their  contract,  had  ceased.  A  receipt  of 
one  therefore  in  his  own  name,  and  not  purporting  to  be  for  the  use 
of  both,  was  not  within  the  scope  of  the  partnership  authority,  and 
did  not  bind  his  partner.  The  defendant  Stafford  gave  credit  to 
Brigham  only.  For  though  his  receipt  purports  to  be  not  merely 
executor}^,  but  a  present  discharge  of  the  note,  yet  as  he  had  no 
authority  to  discharge  it,  either  by  himself,  or  for  himself  and  part- 
ner, and  as  he  had  not  the  note  to  surrender  and  give  up,  the  legal 
effect  and  operation  of  his  receipt  was  an  executory  undertaking  that 
he  would  procure  a  discharge  of  the  note  and  surrender  it.  The  con- 
sequence is,  that  Stafford  paid  his  money  to  the  wrong  person,  and 
must  look  to  him  for  an  indemnity. 

30 


466  PAYMENT. 

Besides,  the  note  was  not  paid  in  the  due  course  of  business.*  It 
was  paid  many  months  before  it  was  due ;  the  full  sum  was  not  paid, 
there  being  more  than  two  years'  interest  due  on  the  notes,  which  was 
wholly  relinquished;  no  notice  was  given  to  Goodrich,  the  partner 
who  transacted  the  business  of  taking  these  notes,  and  giving  the 
receipt  for  them,  and  who  had  the  actual  custody  of  this  note,  all  of 
which  would  be  strong  evidence  to  go  to  a  jury,  to  establish  the  fact 
of  constructive  notice  to  Stafford  that  Brigham  had  no  right,  either 
in  his  own  name  or  as  a  partner  with  Goodrich,  to  receive  payment  of, 
or  to  discharge  this  note.  But  the  other  grounds  are  sufficient,  with- 
out relying  upon  these  circumstances. 

The  grounds  upon  which  the  court  place  their  judgment  are  these : 
The  plaintiff  had  once  a  good  title  to  the  note.  It  was  delivered  to 
Brigham  &  Goodrich,  for  a  special  purpose,  which  was  accomplished. 
After  that,  Brigham  &  Goodrich  had  a  mere  naked  custody  of  the 
note  for  the  plaintiff  and  had  no  right  or  lawful  authority  either  to 
negotiate  or  collect  it ;  a  fortiori,  Brigham  alone  had  no  such  author- 
ity. The  defendant,  Stafford,  was  not  lawfully  called  upon  to  pay 
Brigham,  as  having  the  possession  and  custody  with  a  prima  facie 
title,  because  he  had  no  such  custody  or  possession,  and  the  note  was 
not  due.  Stafford  was  not  deceived  into  taking  the  note  by  the  pro- 
duction and  delivery  of  it,  because  it  was  not  delivered  or  produced; 
if  he  paid  it  therefore  to  Brigham,  without  having  [taken]  up  his 
note,  he  did  it  on  the  faith  that  Brigham  had  good  right  to  receive 
payment  and  discharge  it,  and  of  course  under  the  liability  to  pay  it 
over  again  to  the  rightful  proprietor,  if  Brigham  had  not  such  right. 
In  fact  and  law,  Brigham  had  no  such  right,  but  the  plaintiff  was  at 
the  time  the  rightful  proprietor,  and  of  course  the  defendants  ob- 
tained no  discharge  by  such  payment,  but  upon  the  maturity  of  the 
note  they  were  bound  to  pay  it  to  the  plaintiff.  The  note  having  been 
put  by  Mr.  Goodrich  into  the  hands  of  a  common  friend,  for  the  use 
of  the  party  entitled,  and  the  plaintiff  having  shown  himself  entitled, 
the  note  was  rightly  brought  in  by  the  person  to  whom  it  was  thus 
intrusted,  as  evidence  for  the  plaintiff. 

Judgment  for  plaintiff. 


MADISOTsT   SQUARE    BANK   v.    PIEECE. 

Court  of  Appeals  of  New  York,  March,  1893.    137  N.  Y.  444  ;  33  N.  E.  Rep.  557. 

Payment  by  a  party  secondarily  liable  does  not  discharge  the  instrument ;  ^  and 
part  payment  by  such  a  party  cannot  by  set  up  as  a  defence  by  the  principal  debtor, 
unless  such  payment  was  made  on  his  behalf. 

Action  against  the  maker  of  a  negotiable  promissory  note.  Pay- 
ment in  part,  by  an  indorser,  set  up  in  defence  pro  tanto.    Judgment 

1  Cf.  N.  1.  L.  §  136,  1 ;  id.  §  105.  2  N.  I.  L.  §  138. 


MADISON   SQUARE   BANK   V.   PIERCE.  467 

for  the  plaintiff,  for  the  whole  sum.     The  facts  are  stated  in  the 
opinion  of  the  court,  second  paragraph. 

[Argument  reported.] 

Finch,  J.  We  have  a  novel  and  interesting  question  before  us  on 
this  appeal,  although  its  apparent  importance  will  lessen  as  we  pass 
from  first  impressions  to  some  slower  reflection.  It  arises  upon  facts 
which  are  very  brief  and  simple,  and  may  at  once  be  stated. 

The  defendant  Pierce  made  his  promissory  note  payable  to  his  own 
order  and  indorsed  it  to  the  Bates  Co.,  Limited,  which  indorsed  it  to 
the  plaintiff  bank;  the  latter  discounting  and  paying  the  proceeds 
over  to  the  immediate  indorser.  Thereafter  the  Bates  Co.  became 
insolvent  and  passed  into  the  hands  of  a  receiver,  who  paid  to  the 
bank,  upon  the  liability  of  the  indorser,  seventy-three  and  one-quarter 
per  cent,  of  the  amount  secured  by  the  note.  Later  the  bank  sued 
Pierce  the  maker,  and  recovered  judgment  for  the  full  amount  of 
the  note  in  spite  of  the  proof  showing  the  payment  made  by  the 
receiver,  and  in  disregard  of  the  claim  asserted  by  the  defendant  that 
he  should  only  be  held  liable  for  the  balance  remaining  unpaid.  That 
judgment  has  been  affirmed  by  the  General  Term,  Judges  Daniels 
and  Barrett  each  writing  very  strong  and  valuable  opinions  in  support 
of  their  doctrine,  and  relying  upon  the  authority  of  Jones  v.  Broad- 
hurst,  9  C.  B.  173,  67  Eng.  Com.  L.  175,  which  fully  warrants  their 
conclusion.  The  question  does  not  seem  ever  before  to  have  arisen 
in  this  country,  and  we  are  left  at  liberty  to  examine  the  English 
rule  and  to  follow  it  or  not  as  we  approve  or  disapprove  its  logic  and 
its  consequences. 

We  are  not  to  regard  the  note  as  being  accommodation  paper,  but 
must  assume  its  transfer  for  value.  The  form  of  the  transaction  is 
equivalent  to  what  it  would  have  been  if  the  Bates  Co.  had  been 
named  as  payee,  and  loses  none  of  its  force  by  the  intervention  of  the 
maker  as  first  indorser.  That  indorsement,  in  the  form  adopted,  was 
needed  for  the  regular  transfer  of  title,  but  does  not  change  or  affect 
the  nature  and  character  of  the  maker's  liability.  He  remains  the 
ultimate  debtor,  the  person  who  ought  to  pay  the  debt,  in  preference 
to  and  in  exoneration  of  all  the  other  parties  to  the  paper,  who  in 
some  form  or  other  are  entitled  to  have  final  recourse  to  him.  And 
it  is  to  the  case  of  such  a  maker  of  the  note  or  such  an  acceptor  of  the 
bill  of  exchange  that  the  English  rule  alone  applies,  and  it  is  ex- 
plicitly declared  inapplicable  where  the  indorser  or  drawer  is  the  real 
debtor,  although  in  form  only  secondarily  liable.^ 

Pierce  therefore  was  the  ultimate  debtor,  and  the  party  who  ought 
to  pay  the  note,  both  in  discharge  of  the  obligation  to  the  holder  and 
in  exoneration  of  the  indorser.    When  the  bank  sued  on  the  note,  it 

1  Cf.  N.  I.L.  §  136,2;  §  138,2. 


468  PAYMENT. 

was  the  legal  holder  and  the  legal  party  in  interest.  Upon  production 
of  the  paper  and  the  usual  proof,  judgment  against  the  maker  for  the 
full  amount  was  inevitable,  unless  some  defence  should  be  interposed. 
The  only  possible  one  for  Pierce  was  part  payment,  and  he  was  com- 
pelled to  assert,  and  his  counsel  are  compelled  to  argue,  that  the 
money  paid  by  the  indorser  to  the  holder  inured  to  the  benefit  of  the 
maker  as  a  payment  on  his  debt.  But  that  doctrine  cannot  prevail 
for  very  obvious  reasons.  The  indorser's  payment  did  not  in  the  least 
lessen  or  satisfy  the  maker's  debt.  He  owed  it  all  exactly  as  before, 
AVhat  had  happened  possibly  changed  somewhat  the  real  creditor, 
but  left  the  whole  amount  due  and  unpaid.  To  whom  he  should 
pay  might  become  a  new  question,  but  how  much  he  should  pay  in 
discharge  of  the  note  was  not  made  doubtful  in  any  degree.  What 
the  receiver  advanced  to  the  holder  is  familiarly  described  as  pay- 
ment; but  it  was  such  relatively  to  the  indorser's  liability  alone; 
while  relatively  to  the  obligation  of  the  maker  it  was  an  equitable 
purchase  instead  of  a  payment.^  That  view  of  it  was  taken  in  a 
very  early  case,  the  decision  of  which  depended  necessarily  upon  it. 
Callow  V.  Lawrence,  3  Maule  &  S.  95.  ...  To  the  extent  of  the 
money  paid  the  indorser  becomes  equitably  entitled  to  be  substituted 
to  the  rights  and  remedies  of  the  holder,  and  becomes  pro  tanto  the 
beneficial  owner  of  the  debt ;  so  that  the  maker's  obligation  to  pay 
the  note  in  full,  at  first  due  to  the  holder  solely  in  his  own  right, 
becomes,  after  the  part  payment  by  the  indorser,  still  wholly  due  to 
the  holder,  but  partly  in  his  own  right  and  partly  as  trustee  for  the 
indorser.  A  court  of  law  cannot  split  the  note  into  parts,  and  must 
act  upon  the  legal  interest  and  ownership. 

In  the  present  case  there  was  no  privity  between  maker  and  in- 
dorser as  it  respects  the  action  of  the  latter.  He  paid,  not  as  the 
agent  of  the  maker,  not  at  his  request,  not  for  his  benefit,  and  under 
no  duty  to  relieve  him,  but  independently,  upon  his  own  obligation, 
to  lessen  his  own  responsibility,  and  not  at  all  to  discharge  the 
ultimate  debt  which  it  was  the  maker's  duty  to  pay.  It  seems  very 
clear,  therefore,  that  the  maker  cannot  utilize  for  his  own  benefit 
a  payment  which,  as  to  him,  is  not  a  payment  upon  the  debt.  It 
becomes,  as  I  have  said,  merely  a  question  to  whom  he  shall  pay 
and  who  may  sue  for  and  collect  the  whole  unpaid  sum.  In  that 
question  the  maker  has  no  concern  beyond  the  inquiry  whether  he 
may  become  liable  to  different  persons  for  the  same  debt  and  en- 
counter the  danger  of  paying  it  twice.  I  can  discover  no  such  peril. 
The  judgment  in  favor  of  the  holder  is  a  bar  to  any  other  suit  on  the 
same  note,  and  payment  to  the  holder  discharges  the  note  utterly. 
Ordinarily  the  indorser  cannot  recover  except  upon  the  note,  and  as 
holder,  and  in  accordance  with  the  law  merchant.  If  he  ever  has 
any  other  right  of  action  against  the  maker,  it  is  either  in  equity 

1  Cf.  N.  I.  L.  §  138. 


MADISON   SQUAEE   BANK   V.   PIERCE.  469 

or  by  force  of  some  facts  beyond  the  bare  relation  established  by  the 
paper.  And  where  the  note  is  merged  in  the  holder's  judgment,  or 
paid  in  full  to  him  by  the  maker,  the  indorser's  only  right  is  through 
the  judgment  or  against  the  proceeds  if  he  has  made  a  partial  pay- 
ment to  the  holder.  That  does  the  indorser  no  wrong.  If  he  is  not 
content  that  the  holder  shall  collect  to  some  extent  as  his  trustee,  he 
may  prevent  it  by  payment  in  full  to  the  holder  and  so  entitle  him- 
self to  the  possession  of  the  note  on  which  to  sue,  or,  if  judgment 
has  been  obtained,  to  be  subrogated  to  all  of  the  rights  of  the  plaintiff 
therein. 

I  think  this  result  is  clearly  indicated  by  our  own  decisions. 
[Mechanics'  Bank  v.  Hazard,  13  Johns.  353;  and  Guernsey  v. 
Burns,  25  Wend.  411,  discussed.] 

It  thus  becomes  apparent  that  there  is  no  very  great  importance 
in  the  question  which  method  of  securing  payment  from  the  maker 
is  adopted,  since  the  same  result  follows  from  each,  and  that  it 
narrows  down  to  the  inquiry  whether  as  matter  of  correct  doctrine 
and  of  convenience  in  practice  the  holder  may  recover  the  whole 
debt  against  maker  or  acceptor  for  himself  and  as  trustee  for  the 
indorser  to  the  extent  of  his  acquired  interest;  or  whether  he  shall 
take  judgment  only  for  the  balance,  leaving  the  indorser  to  sue  in 
some  way  and  on  some  theory,  which  apparently  could  not  be  upon 
the  note  because  already  merged  in  the  judgment,  but  might  be  for 
money  paid  for  the  use  of  the  maker,  since  he  gets  the  benefit  of  it 
in  the  reduction  of  the  judgment,  as  was  held  in  Pownal  v.  Ferrand, 
6  Barn.  &  C.  439,  where  the  holder  deducted  the  indorser's  payment 
from  the  levy  against  the  maker.  The  former  seems  to  me  to  be 
the  logical  and  convenient  method,  and  so  I  think  we  should  follow 
the  English  doctrine. 

I  have  not  underrated  the  assault  made  upon  it  by  the  appellant. 
He  asserts  that  Jones  v.  Broadhurst  is  contrary  to  the  earlier  cases, 
and  has  been  criticised  and  shaken  by  the  later  ones.  I  have  exam- 
ined them  all,  with  some  wonder  at  the  amount  of  learning  and 
ingenuity  expended  upon  the  subject.  Pierson  v.  Dunlop,  Cowp.  571 ; 
Walwyn  v.  St.  Quentin,  1  Bos.  &  P.  652 ;  Bacon  v.  Searles,  1  H. 
Bl.  88;  Hemming  v.  Brook,  Car.  &  M.  57;  Eandall  v.  Moon,  12 
C.  B,  261 ;  Cook  v.  Lister,  13  C,  B,  n,  s.  543 ;  Solomon  v.  Davis, 
1  Cahabe  &  Ellis,  83 ;  Thornton  v.  Maynard,  L.  E,  10  C,  P,  695. 
The  prior  cases  were  very  fully  and  carefully  reviewed  by  Baron 
Cresswell,^  in  the  opinion  rendered  in  Jones  v.  Broadhurst;  and  of 
the  subsequent  cases  I  deem  it  only  necessary  to  say  that  along  with 
some  criticism  and  doubt,  the  doctrine  has  remained  substantially 
unshaken,  and  the  case  last  cited  was  declared  by  Lord  Coleridge 
to  be  the  accepted  law. 

*  A  slip  for  Cresawell,  J. 


470  PAYMENT. 

It  must  not  be  forgotten,  however,  and  I  may  prudently  repeat, 
that  the  doctrine  has  no  application  to  accommodation  paper,  and 
rests  wholly  upon  the  actual  and  ultimate  indebtedness  of  maker 
or  acceptor  as  the  party  who  ought  to  pay.  In  such  a  case  as  that, 
which  correctly  describes  the  one  now  before  us,  and  Avhere  no  dis- 
turbing facts  affect  the  relations  of  the  parties  as  fixed  by  the  paper 
itself,  I  think  the  holder  may  sue  and  recover  the  full  amount,  re- 
ceiving so  much  of  the  proceeds  as  represents  a  part  payment  by  the 
indorser,  as  trustee  for  him. 

It  follows  that  the  judgment  should  be  affirmed  with  costs. 

All  concur,  except  Maynard,  J.,  dissenting. 

Judgment  affirmed. 


SHAW   V.    KNOX. 

Supreme  Court  of  Massachusetts,  November,  1867.     98  Mass.  214. 

A  party  secondarily  liable,  on  paying  the  instrument  and  taking  it  up,  may  enforce 
it  against  prior  parties,  or  again  negotiate  it.i 

Contract  on  a  draft  by  Nathaniel  Heath  on  John  W.  West  for 
payment  of  $450,  three  months  after  date  to  the  order  of  the  defend- 
ant, indorsed  by  the  latter  and  bearing  also,  below  the  defendant's 
indorsement,  the  indorsement  of  E.  Longfellow  &  Son. 

Trial  in  the  Superior  Court,  without  a  Jury,  when  it  appeared  that 
the  draft  was  drawn  on  the  day  of  its  date,  and  indorsed  by  the  de- 
fendant, and  then  at  his  request  by  E.  Longfellow  &  Son,  "  so  that  it 
could  be  discounted"  (neither  of  the  indorsers  receiving  any  con- 
sideration therefor),  and  then  was  negotiated,  and  discounted  by  a 
bank,  and  presented  for  acceptance;  that  it  was  accepted  by  West, 
but  on  maturity  was  protested  for  non-payment;  and  that  E.  Long- 
fellow &  Son  some  months  later  paid  it  to  the  bank  and  took  it  up, 
and  afterwards  sold  it  to  the  plaintiff. 

The  defendant  asked  the  Judge  to  rule  "  that  E.  Longfellow  &  Son 
and  the  defendant  were  Joint  accommodation  indorsers,  and,  when 
the  former  paid  the  draft,  its  negotiability  was  destroyed,  and  they 
could  not  pass  it  to  the  plaintiff  so  that  he  could  maintain  an  action 
thereon."  But  he  declined  so  to  rule,  and  ruled  that  the  plaintiff 
could  maintain  his  action,  and  found  for  the  plaintiff;  and  the 
defendant  alleged  exceptions. 

[Argument  not  reported.] 

BiGELOW,  C.  J.  There  was  no  Joint  liability  on  the  part  of  the  de- 
fendant with  the  subsequent  indorsers.    The  indorsers  on  the  draft 

1  N.  I.  L.  §  138. 


MADISON   SQUARE   BANK   V.   PIERCE.  471 

were  all  liable  to  the  holders  of  the  draft  for  value  on  their  several 
contracts  of  indorsement.  There  was  no  agreement  between  the 
parties,  when  the  draft  was  made  and  indorsed,  that  they  should  hold 
any  other  relation  towards  each  other  than  that  which  would  result 
from  their  being  successive  indorsers  on  the  draft  for  the  accommo- 
dation of  the  drawer.^  If  the  last  indorser  paid  the  draft  to  the 
holder  for  value,  he  would  succeed  to  the  right  of  such  holder,  and 
could  look  to  his  prior  indorser  for  paj^ment  of  the  amount  paid  by 
him.  Guild  v.  Eager,  17  Mass.  615.  Such  payment  was  in  fact  made 
by  the  second  indorsers,  from  whom  the  plaintiff  derives  his  title  to 
the  draft.  The  relations  of  the  parties  to  the  draft  can  in  no  sense 
be  regarded  as  creating  a  contract  of  joint  guaranty  and  suretyship. 
The  rights  and  duties  of  the  several  parties  to  an  accommodation 
note  or  bill  of  exchange  are  the  same  in  all  respects  as  upon  notes 
given  for  value.  The  legal  effect  of  the  contract  into  which  they 
respectively  enter  by  becoming  parties  to  negotiable  paper  is  that 
which  appears  on  the  face  of  the  bill  or  note.  It  follows  that,  if  an 
accommodation  indorser  is  obliged  to  take  up  the  draft  in  the  hands 
of  a  holder  for  value,  he  can  look  to  his  prior  indorser  for  payment. 
Church  V.  Barlow,  9  Pick.  547;  Clapp  v.  Eice,  13  Gray,  403 /Howe 
V.  Merrill,  5  Gush.  80. 

Exceptions  overruled. 

1  Cf.  N.  I.  L.  §  85. 


472  NEGOTIABLE   INSTRUMENTS   LAW. 


NEGOTIABLE  INSTRUMENTS  LAW. 

[REVISED  LAWS   OF  MASSACHUSETTS,   VOLUME  I. 
CHAPTER   73.] 


NEGOTIABLE   INSTRUMENTS,   IN   GENERAL. 

Form  and  Interpretation. 

Section  18.  An  instrument  to  be  negotiable  must  conform  to  the 
following  requirements :  — 

1.  It  must  be  in  writing  and  signed  by  the  maker  or  drawer ; 

2.  Must  contain  an  unconditional  promise  or  order  to  pay  a  sum 
certain  in  money ; 

3.  Must  be  payable  on  demand  or  at  a  fixed  or  determinable  future 
time; 

4.  Must  be  payable  to  order  or  to  bearer;  and 

5.  Where  the  instrument  is  addressed  to  a  drawee  he  must  be 
named  or  otherwise  indicated  therein  with  reasonable  certainty. 

Sect.  19.  The  sum  payable  is  a  sum  certain  within  the  meaning 
of  sections  eighteen  to  two  hundred  and  twelve,  inclusive,  although 
it  is  to  be  paid : 

1.  With  interest;  or 

2.  By  stated  instalments ;  or 

3.  By  stated  instalments,  with  a  provision  that,  upon  default  in 
pa}Tnent  of  any  instalment  or  of  interest,  the  whole  shall  become 
due;  or 

4.  With  exchange,  whether  at  a  fixed  rate  or  at  a  current  rate ;  or 

5.  With  costs  of  collection  or  an  attorney's  fee,  in  case  payment 
shall  not  be  made  at  maturity. 

Sect.  20.  An  unqualified  order  or  promise  to  pay  is  unconditional 
within  the  meaning  of  sections  eighteen  to  two  hundred  and  twelve, 
inclusive,  though  coupled  with : 

1.  An  indication  of  a  particular  fund  out  of  which  reimburse- 
ment is  to  be  made,  or  a  particular  account  to  be  debited  with  the 
amount ;   or 

2.  A  statement  of  the  transaction  which  gives  rise  to  the  instru- 
ment. 

But  an  order  or  promise  to  pay  only  out  of  a  particular  fund  is 
not  unconditional. 


NEGOTIABLE   INSTRUMENTS,   IN   GENERAL.  473 

Sect.  21.  An  instrument  is  payable  at  a  determinable  future 
time,  within  the  meaning  of  sections  eighteen  to  two  hundred  and 
twelve,  inclusive,  which  is  expressed  to  be  payable : 

1.  At  a  fixed  period  after  date  or  sight ;  or 

2.  On  or  before  a  fixed  or  determinable  future  time  specified 
therein;  or 

3.  On  or  at  a  fixed  period  after  the  occurrence  of  a  specified 
event,  which  is  certain  to  happen,  though  the  time  of  happening  is 
uncertain. 

An  instrument  payable  upon  a  contingency  is  not  negotiable,  and 
the  happening  of  the  event  does  not  cure  the  defect. 

Sect.  22.  An  instrument  which  contains  an  order  or  promise  to 
do  any  act  in  addition  to  the  payment  of  money  is  not  negotiable. 
But  the  negotiable  character  of  an  instrument  otherwise  negotiable 
is  not  affected  by  a  provision  which : 

1.  Authorizes  the  sale  of  collateral  securities  in  case  the  instru- 
ment is  not  paid  at  maturity ;  or 

2.  Authorizes  a  confession  of  judgment  if  the  instrument  is  not 
paid  at  maturity;  or 

3.  Waives  the  benefit  of  any  law  intended  for  the  advantage  or 
protection  of  the  obligor;  or 

4.  Gives  the  holder  an  election  to  require  something  to  be  done  in 
lieu  of  payment  of  money. 

But  nothing  in  this  section  shall  validate  any  provision  or  stipu- 
lation otherwise  illegal. 

Sect.  23.  The  validity  and  negotiable  character  of  an  instrument 
are  not  affected  by  the  fact  that : 

1.  It  is  not  dated;  or 

2.  Does  not  specify  the  value  given,  or  that  any  value  has  been 
given  therefor ;  or 

3.  Does  not  specify  the  place  where  it  is  drawn  or  the  place  where 
it  is  payable;  or 

4.  Bears  a  seal;  or 

5.  Designates  a  particular  kind  of  current  money  in  which  pay- 
ment is  to  be  made. 

But  nothing  in  this  section  shall  alter  or  repeal  any  statute  re- 
quiring in  certain  cases  the  nature  of  the  consideration  to  be  stated 
in  the  instrument. 

Sect.  24.     An  instrument  is  payable  on  demand : 

1.  Where  it  is  expressed  to  be  payable  on  demand,  or  at  sight,  or 
on  presentation;   or 

2.  In  which  no  time  for  payment  is  expressed. 

Where  an  instrument  is  issued,  accepted  or  indorsed,  when  overdue, 
it  is,  as  regards  the  person  so  issuing,  accepting,  or  indorsing  it, 
payable  on  demand. 

Sect.  25.    The  instrument  is  payable  to  order  where  it  is  drawn 


474  NEGOTIABLE   INSTRUMENTS  LAW. 

payable  to  the  order  of  a  specified  person  or  to  him  or  his  order.  It 
may  be  drawn  payable  to  the  order  of : 

1.  A  payee  who  is  not  maker,  drawer,  or  drawee;  or 

2.  The  drawer  or  maker;   or 

3.  The  drawee;   or 

4.  Two  or  more  payees  jointly;  or 

5.  One  or  some  of  several  payees ;   or 

6.  The  holder  of  an  office  for  the  time  being. 

Where  the  instrument  is  payable  to  order  the  payee  must  be  named 
or  otherwise  indicated  therein  with  reasonable  certainty. 
Sect.  26.    The  instrument  is  payable  to  bearer: 

1.  When  it  is  expressed  to  be  so  payable ;  or 

2.  WTien  it  is  payable  to  a  person  named  therein  or  bearer ;  or 

3.  When  it  is  payable  to  the  order  of  a  fictitious  or  non-existing 
person,  and  such  fact  was  known  to  the  person  making  it  so  pay- 
able; or 

4.  When  the  name  of  the  payee  does  not  purport  to  be  the  name 
of  any  person ;  or 

5.  When  the  only  or  last  indorsement  is  an  indorsement  in  blank. 
Sect.  27.    The  instrument  need  not  follow  the  language  of  this 

chapter,  but  any  terms  are  sufficient  which  clearly  indicate  an  inten- 
tion to  conform  to  the  requirements  hereof. 

Sect.  28.  Where  the  instrument  or  an  acceptance  or  any  in- 
dorsement thereon  is  dated  such  date  is  deemed  prima  facie  to  be 
the  true  date  of  the  making,  drawing,  acceptance,  or  indorsement,  as 
the  case  may  be. 

Sect.  29.  The  instrument  is  not  invalid  for  the  reason  only  that 
it  is  ante-dated  or  post-dated,  provided  this  is  not  done  for  an  illegal 
or  fraudulent  purpose.  The  person  to  whom  an  instrument  so  dated 
is  delivered  acquires  the  title  thereto  as  of  the  date  of  delivery. 

Sect.  30.  Where  an  instrument  expressed  to  be  payable  at  a  fixed 
period  after  date  is  issued  undated,  or  where  the  acceptance  of  an 
instrument  payable  at  a  fixed  period  after  sight  is  undated,  any 
holder  may  insert  therein  the  true  date  of  issue  or  acceptance,  and 
the  instrument  shall  be  payable  accordingly.  The  insertion  of  a 
wrong  date  does  not  avoid  the  instrument  in  the  hands  of  a  subse- 
quent holder  in  due  course ;  but  as  to  him  the  date  so  inserted  is  to 
be  regarded  as  the  true  date. 

Sect.  31.  WTiere  the  instrument  is  wanting  in  any  material  par- 
ticular the  person  in  possession  thereof  has  a  prima  facie  authority 
to  complete  it  by  filling  up  the  blanks  therein.  And  a  signature  on 
a  blank  paper  delivered  by  the  person  making  the  signature,  in  order 
that  the  paper  may  be  converted  into  a  negotiable  instrument,  oper- 
ates as  a  prima  facie  authority  to  fill  it  up  as  such  for  any  amount. 
In  order,  however,  that  any  such  instrument  when  completed  may  be 
enforced  against  any  person  who  became  a  party  thereto  prior  to  its 


NEGOTIABLE   INSTRUMENTS,   IN   GENERAL.  475 

completion,  it  must  be  filled  up  strictly  in  accordance  with  the  au- 
thority given,  and  within  a  reasonable  time.  But  if  any  such  instru- 
ment, after  completion,  is  negotiated  to  a  holder  in  due  course,  it  is 
valid  and  effectual  for  all  purposes  in  his  hands,  and  he  may  enforce 
it  as  if  it  had  been  filled  up  strictly  in  accordance  with  the  authority 
given,  and  within  a  reasonable  time. 

Sect.  32.  Where  an  incomplete  instrument  has  not  been  delivered 
it  will  not,  if  completed  and  negotiated  without  authority,  be  a  valid 
contract  in  the  hands  of  any  holder,  as  against  any  person  whose 
signature  was  placed  thereon  before  delivery. 

Sect.  33.  Every  contract  on  a  negotiable  instrument  is  incom- 
plete and  revocable  until  delivery  of  the  instrument  for  the  purpose 
of  giving  effect  thereto.  As  between  immediate  parties,  and  as  re- 
gards a  remote  party  other  than  a  holder  in  due  course,  the  delivery, 
in  order  to  be  effectual,  must  be  either  by  or  under  the  authority 
of  the  party  making,  drawing,  accepting  or  indorsing,  as  the  case 
may  be;  and  in  such  case  the  delivery  may  be  shown  to  have  been 
conditional,  or  for  a  special  purpose  only,  and  not  for  the  purpose 
of  transferring  the  property  in  the  instrument.  But  where  the  in- 
strument is  in  the  hands  of  a  holder  in  due  course  a  valid  delivery 
thereof  by  all  parties  prior  to  him  so  as  to  make  them  liable  to  him 
is  conclusively  presumed.  Where  the  instrument  is  no  longer  in 
the  possession  of  a  party  whose  signature  appears  thereon  a  valid 
and  intentional  delivery  by  him  is  presumed  until  the  contrary  is 
proved. 

Sect.  34.  Where  the  language  of  the  instrument  is  ambiguous,  or 
there  are  omissions  therein,  the  following  rules  of  construction  apply : 

1.  Where  the  sum  payable  is  expressed  in  words  and  also  in  fig- 
ures and  there  is  a  discrepancy  between  the  two,  the  sum  denoted  by 
the  words  is  the  sum  payable ;  but  if  the  words  are  ambiguous  or  un- 
certain reference  may  be  had  to  the  figures  to  fix  the  amount ; 

2.  Where  the  instrument  provides  for  the  payment  of  interest, 
without  specifying  the  date  from  which  interest  is  to  run,  the  inter- 
est runs  from  the  date  of  the  instrument,  and  if  the  instrument  is 
undated,  from  the  issue  thereof; 

3.  Where  the  instrument  is  not  dated  it  will  be  considered  to  be 
dated  as  of  the  time  it  was  issued; 

4.  Where  there  is  a  conflict  between  the  written  and  printed  pro- 
visions of  the  instrument  the  written  provisions  prevail ; 

5.  Where  the  instrument  is  so  ambiguous  that  there  is  doubt 
whether  it  is  a  bill  or  note  the  holder  may  treat  it  as  either  at  his 
election ; 

6.  Where  a  signature  is  so  placed  upon  the  instrument  that  it  is 
not  clear  in  what  capacity  the  person  making  the  same  intended  to 
sign  he  is  to  be  deemed  an  indorser; 

7.  Where  an  instrument  containing  the  words  "  I  promise  to  pay  " 


476  NEGOTIABLE   INSTRUMENTS  LAW. 

is  signed  by  two  or  more  persons  they  are  deemed  to  be  jointly  and 
severally  liable  thereon. 

Sect.  35.  No  person  is  liable  on  the  instrument  whose  signature 
does  not  appear  thereon,  except  as  herein  otherwise  expressly  provided. 
But  one  who  signs  in  a  trade  or  assumed  name  will  be  liable  to  the 
same  extent  as  if  he  had  signed  in  his  own  name. 

Sect.  36.  The  signature  of  any  party  may  be  made  by  a  duly 
authorized  agent.  No  particular  form  of  appointment  is  necessary 
for  this  purpose;  and  the  authority  of  the  agent  may  be  established 
as  in  other  cases  of  agency. 

Sect.  37.  Where  the  instrument  contains,  or  a  person  adds  to 
his  signature,  words  indicating  that  he  signs  for  or  on  behalf  of  a 
principal,  or  in  a  representative  capacity,  he  is  not  liable  on  the 
instrument  if  he  was  duly  authorized ;  but  the  mere  addition  of  words 
describing  him  as  an  agent,  or  as  filling  a  representative  character 
without  disclosing  his  principal,  does  not  exempt  him  from  personal 
liability. 

Sect.  38.  A  signature  by  "  procuration  "  operates  as  notice  that 
the  agent  has  but  a  limited  authority  to  sign,  and  the  principal  is 
bound  only  in  case  the  agent  in  so  signing  acted  within  the  actual 
limits  of  his  authority. 

Sect.  39.  The  indorsement  or  assignment  of  the  instrument  by 
a  corporation  or  by  an  infant  passes  the  property  therein,  notwith- 
standing that  from  want  of  capacity  the  corporation  or  infant  may 
incur  no  liability  thereon. 

Sect.  40.  Where  a  signature  is  forged  or  made  without  the  au- 
thority of  the  person  whose  signature  it  purports  to  be  it  is  wholly 
inoperative,  and  no  right  to  retain  the  instrument,  or  to  give  a  dis- 
charge therefor,  or  to  enforce  pa3'ment  thereof  against  any  party 
thereto,  can  be  acquired  through  or  under  such  signature,  unless  the 
party  against  whom  it  is  sought  to  enforce  such  right  is  precluded 
from  setting  up  the  forgery  or  want  of  authority. 

Consideration. 

Sect.  41.  Every  negotiable  instrument  is  deemed  prima  facie  to 
have  been  issued  for  a  valuable  consideration,  and  every  person  whose 
signature  appears  thereon  to  have  become  a  party  thereto  for  value. 

Sect.  43.  Value  is  any  consideration  sufficient  to  support  a  simple 
contract.  An  antecedent  or  pre-existing  debt  constitutes  value,  and 
is  deemed  such  whether  the  instrument  is  payable  on  demand  or  at 
a  future  time. 

Sect.  43.  Where  value  has  at  any  time  been  given  for  the  instru- 
ment the  holder  is  deemed  a  holder  for  the  value  in  respect  to  all 
parties  who  became  such  prior  to  that  time. 

Sect.  44.    T^Tiere  the  holder  has  a  lien  on  the  instrument,  arising 


NEGOTIABLE   INSTRUMENTS,    IN   GENERAL.  477 

either  from  contract  or  by  implication  of  law,  he  is  deemed  a  holder 
for  value  to  the  extent  of  his  lien. 

Sect.  45.  Absence  or  failure  of  consideration  is  matter  of  defence 
as  against  any  person  not  a  holder  in  due  course ;  and  partial  failure 
of  consideration  is  a  defence  pro  ianto,  whether  the  failure  is  an 
ascertained  and  liquidated  amount  or  otherwise. 

Sect.  46.  An  accommodation  party  is  one  who  has  signed  the 
instrument  as  maker,  drawer,  acceptor  or  indorser,  without  receiving 
value  therefor,  and  for  the  purpose  of  lending  his  name  to  some  other 
person.  Such  a  person  is  liable  on  the  instrument  to  a  holder  for 
value,  notwithstanding  such  holder  at  the  time  of  taking  the  instru- 
ment knew  him  to  be  only  an  accommodation  party. 


Negotiation. 

Sect.  47.  An  instrument  is  negotiated  when  it  is  transferred 
from  one  person  to  another  in  such  manner  as  to  constitute  the 
transferee  the  holder  thereof.  If  payable  to  bearer  it  is  negotiated 
by  delivery;  if  payable  to  order  it  is  negotiated  by  the  indorsement 
of  the  holder  completed  by  delivery. 

Sect.  48.  The  indorsement  must  be  written  on  the  instrument 
itself  or  upon  a  paper  attached  thereto.  The  signature  of  the  indorser 
without  additional  words,  is  a  sufficient  indorsement. 

Sect.  49.  The  indorsement  must  be  an  indorsement  of  the  entire 
instrument.  An  indorsement  which  purports  to  transfer  to  the  in- 
dorsee a  part  only  of  the  amount  payable,  or  which  purports  to 
transfer  the  instrument  to  two  or  more  indorsees  severally,  does 
not  operate  as  a  negotiation  of  the  instrument.  But  where  the  instru- 
ment has  been  paid  in  part  it  may  be  indorsed  as  to  the  residue. 

Sect.  50.  An  indorsement  may  be  either  special  or  in  blank; 
and  it  may  also  be  either  restrictive,  or  qualified,  or  conditional. 

Sect.  51.  A  special  indorsement  specifies  the  person  to  whom,  or 
to  whose  order,  the  instrument  is  to  be  payable ;  and  the  indorsement 
of  such  indorsee  is  necessary  to  the  further  negotiation  of  the  instru- 
ment. An  indorsement  in  blank  does  not  specify  any  indorsee,  and 
an  instrument  so  indorsed  is  payable  to  bearer  and  may  be  negotiated 
by  delivery. 

Sect.  52.  The  holder  may  convert  a  blank  indorsement  into  a 
special  indorsement  by  writing  over  the  signature  of  the  indorser  in 
blank  any  contract  consistent  with  the  character  of  the  indorsement. 

Sect.  53.    An  indorsement  is  restrictive,  which  either: 

1.  Prohibits  the  further  negotiation  of  the  instrument;    or 

2.  Constitutes  the  indorsee  the  agent  of  the  indorser;   or 

3.  Vests  the  title  in  the  indorsee  in  trust  for  or  to  the  use  of  some 
other  person. 


478  NEGOTIABLE   INSTRUMENTS   LAW. 

But  the  mere  absence  of  words  implying  power  to  negotiate  does 
not  make  an  indorsement  restrictive. 

Sect.  54.  A  restrictive  indorsement  confers  upon  the  indorsee 
the  right: 

1.  To  receive  payment  of  the  instrument ; 

2.  To  bring  any  action  thereon  that  the  indorser  could  bring; 

3.  To  transfer  his  rights  as  such  indorsee,  where  the  form  of  the 
indorsement  authorizes  him  to  do  so. 

But  all  subsequent  indorsees  acquire  only  the  title  of  the  first 
indorsee  under  the  restrictive  indorsement. 

Sect.  55.  A  qualified  indorsement  constitutes  the  indorser  a 
mere  assignor  of  the  title  to  the  instrument.  It  may  be  made  by 
adding  to  the  indorser's  signature  the  words  "  without  recourse  "  or 
any  words  of  similar  import.  Such  an  indorsement  does  not  impair 
the  negotiable  character  of  the  instrument. 

Sect.  56.  Where  an  indorsement  is  conditional  a  party  required 
to  pay  the  instrument  may  disregard  the  condition  and  make  payment 
to  the  indorsee  or  his  transferee,  whether  the  condition  has  been  ful- 
filled or  not.  But  any  person  to  whom  an  instrument  so  indorsed 
is  negotiated  will  hold  the  same,  or  the  proceeds  thereof,  subject  to 
the  rights  of  the  person  indorsing  conditionally. 

Sect.  57.  Where  an  instrument  payable  to  bearer  is  indorsed  spe- 
cially it  may  nevertheless  be  further  negotiated  by  delivery;  but  the 
person  indorsing  specially  is  liable  as  indorser  only  to  such  holders 
as  make  title  through  his  indorsement. 

Sect.  58.  Where  an  instrument  is  payable  to  the  order  of  two 
or  more  payees  or  indorsees  who  are  not  partners,  all  must  indorse, 
unless  the  one  indorsing  has  authority  to  indorse  for  the  others. 

Sect.  59.  Where  an  instrument  is  drawn  or  indorsed  to  a  person 
as  "  cashier,"  or  other  fiscal  officer  of  a  bank  or  corporation,  it  is 
deemed  prima  facie  to  be  payable  to  the  bank  or  corporation  of  which 
he  is  such  officer,  and  may  be  negotiated  either  by  the  indorsement  of 
the  bank  or  corporation,  or  by  the  indorsement  of  the  officer. 

Sect.  60.  Where  the  name  of  a  payee  or  indorsee  is  wrongly 
designated  or  misspelled  he  may  indorse  the  instrument  as  therein 
described,  adding,  if  he  thinks  fit,  his  proper  signature. 

Sect.  61.  Where  any  person  is  under  obligation  to  indorse  in  a 
representative  capacity  he  may  indorse  in  such  terms  as  to  negative 
personal  liability. 

Sect.  63.  Except  where  an  indorsement  bears  date  after  the  ma- 
turity of  the  instrument  every  negotiation  is  deemed  prima  facie  to 
have  been  effected  before  the  instrument  was  overdue. 

Sect.  63.  Except  where  the  contrary  a]")pears  every  indorsement 
is  presumed  prima  facie  to  have  been  made  at  the  place  where  the 
instrument  is  dated. 

Sect.  64.     An  instrument  negotiable  in  its  origin  continues  to  be 


NEGOTIABLE   INSTRUMENTS,  IN   GENERAL.  479 

negotiable  until  it  has  been  restrictively  indorsed  or  discharged  by 
payment  or  otherwise. 

Sect.  65.  The  holder  may  at  any  time  strike  out  any  indorse- 
ment which  is  not  necessary  to  his  title.  The  indorser  whose 
indorsement  is  struck  out  and  all  indorsers  subsequent  to  him  are 
thereby  relieved  from  liability  on  the  instrument. 

Sect.  66.  Wliere  the  holder  of  an  instrument  payable  to  his  order 
transfers  it  for  value  witliout  indorsing  it  the  transfer  vests  in  the 
transferee  such  title  as  the  transferrer  had  therein,  and  the  trans- 
feree acquires,  in  addition,  the  right  to  have  the  indorsement  of  the 
transferrer.  But  for  the  purpose  of  determining  whether  the  trans- 
feree is  a  holder  in  due  course  the  negotiation  takes  effect  as  of  the 
time  when  the  indorsement  is  actually  made. 

Sect.  67.  Where  an  instrument  is  negotiated  back  to  a  prior 
party,  such  party  may,  subject  to  the  provisions  of  sections  eighteen 
to  two  hundred  and  twelve,  inclusive,  reissue  and  further  negotiate 
the  same.  But  he  is  not  entitled  to  enforce  payment  thereof  against 
any  intervening  party  to  whom  he  was  personally  liable. 

Rights  of  the  Holder. 

Sect.  68.  The  holder  of  a  negotiable  instrument  may  sue  thereon 
in  his  own  name,  and  payment  to  him  in  due  course  discharges  the 
instrument. 

Sect.  69.  A  holder  in  due  course  is  a  holder  who  has  taken  the 
instrument  under  the  following  conditions : 

1.  That  it  is  complete  and  regular  upon  its  face ; 

2.  That  he  became  the  holder  of  it  before  it  was  overdue,  and 
without  notice  that  it  had  been  previously  dishonored,  if  such  was 
the  fact; 

3.  That  he  took  it  in  good  faith  and  for  value ; 

4.  That  at  the  time  it  was  negotiated  to  him  he  had  no  notice  of 
any  infirmity  in  the  instrument  or  defect  in  the  title  of  the  person 
negotiating  it. 

Sect.  70.  Where  an  instrument  payable  on  demand  is  negotiated 
an  unreasonable  length  of  time  after  its  issue  the  holder  is  not  deemed 
a  holder  in  due  course. 

Sect.  71.  Where  the  transferee  receives  notice  of  any  infirmity  in 
the  instrument  or  defect  in  the  title  of  the  person  negotiating  the 
same  before  he  has  paid  the  full  amount  agreed  to  be  paid  therefor 
he  will  be  deemed  a  holder  in  due  course  only  to  the  extent  of  the 
amount  theretofore  paid  by  him. 

Sect.  72.  The  title  of  a  person  who  negotiates  an  instrument  is 
defective  within  the  meaning  of  sections  eighteen  to  two  hundred 
and  twelve,  inclusive,  when  he  obtained  the  instrument,  or  any  sig- 
nature thereto,  by  fraud,  duress,  or  force  and  fear,  or  other  unlawful 


480  NEGOTIABLE   INSTRUMENTS   LAW. 

means,  or  for  an  illegal  consideration,  or  when  he  negotiates  it  in 
breach  of  faith,  or  under  such  circumstances  as  amount  to  a  fraud. 

Sect.  73.  To  constitute  notice  of  an  infirmity  in  the  instrument 
or  defect  in  the  title  of  the  person  negotiating  the  same  the  person 
to  whom  it  is  negotiated  must  have  had  actual  knowledge  of  the 
infirmity  or  defect,  or  knowledge  of  such  facts  that  his  action  in 
taking  the  instrument  amounted  to  bad  faith. 

Sect.  74.  A  holder  in  due  course  holds  the  instrument  free  from 
any  defect  of  title  of  prior  parties,  and  free  from  defences  available 
to  prior  parties  among  themselves,  and  may  enforce  payment  of  the 
instrument  for  the  full  amount  thereof  against  all  parties  liable 
thereon. 

Sect.  75.  In  the  hands  of  any  holder  other  than  a  holder  in  due 
course  a  negotiable  instrument  is  subject  to  the  same  defences  as 
if  it  were  non-negotiable.  But  a  holder  who  derives  his  title  through 
a  holder  in  due  course,  and  who  is  not  himself  a  party  to  any  fraud 
or  illegality  affecting  the  instrument,  has  all  the  rights  of  such 
former  holder  in  respect  of  all  parties  prior  to  the  latter. 

Sect.  76.  Every  holder  is  deemed  prima  facie  to  be  a  holder  in 
due  course;  but  when  it  is  shown  that  the  title  of  any  person  who 
has  negotiated  the  instrument  was  defective  the  burden  is  on  the 
holder  to  prove  that  he  or  some  person  under  whom  he  claims  ac- 
quired the  title  as  holder  in  due  course.  But  the  last  mentioned  rule 
does  not  apply  in  favor  of  a  party  who  became  bound  on  the  instru- 
ment prior  to  the  acquisition  of  such  defective  title. 

Liahilities  of  Parties. 

Sect.  77.  The  maker  of  a  negotiable  instrument  by  making  it 
engages  that  he  will  pay  it  according  to  its  tenor;  and  admits  the 
existence  of  the  payee  and  his  then  capacity  to  indorse. 

Sect.  78.  The  drawer,  by  drawing  the  instrument,  admits  the 
existence  of  the  payee  and  his  then  capacity  to  indorse ;  and  engages 
that  on  due  presentment  the  instrument  will  be  accepted  or  paid, 
or  both,  according  to  its  tenor,  and  that  if  it  is  dishonored,  and  the 
necessary  proceedings  on  dishonor  are  duly  taken,  he  will  pay  the 
amount  thereof  to  the  holder,  or  to  any  subsequent  indorser  who  may 
be  compelled  to  pay  it.  But  the  drawer  may  insert  in  the  instrument 
an  express  stipulation  negativing  or  limiting  his  own  liability  to  the 
holder. 

Sect.  79.  The  acceptor  by  accepting  the  instrument  engages  that 
he  will  pay  it  according  to  the  tenor  of  his  acceptance ;   and  admits : 

1.  The  existence  of  the  drawer,  the  genuineness  of  his  signature, 
and  his  capacity  and  authority  to  draw  the  instrument ;   and 

2.  The  existence  of  the  payee  and  his  then  capacity  to  indorse. 
Sect.  80.    A  person  placing  his  signature  upon  an  instrument 


NEGOTIABLE   INSTRUMENTS,   IN   GENERAL.  481 

otherwise  than  as  maker,  drawer  or  acceptor  is  deemed  to  be  an  in- 
dorser,  unless  he  clearly  indicates  by  appropriate  words  his  intention 
to  be  bound  in  some  other  capacity. 

Sect.  81.  Where  a  person,  not  othen^dse  a  party  to  an  instru- 
ment, places  thereon  his  signature  in  blank  before  delivery,  he  is 
liable  as  indorser  in  accordance  with  the  following  rules: 

1.  If  the  instrument  is  payable  to  the  order  of  a  third  person 
he  is  liable  to  the  payee  and  to  all  subsequent  parties; 

2.  If  the  instrument  is  payable  to  the  order  of  the  maker  or 
drawer,  or  is  payable  to  bearer,  he  is  liable  to  all  parties  subsequent 
to  the  maker  or  drawer; 

3.  If  he  signs  for  the  accommodation  of  the  payee  he  is  liable  to 
all  parties  subsequent  to  the  payee. 

Sect.  82.  Every  person  negotiating  an  instrument  by  delivery 
or  by  qualified  indorsement  warrants : 

1.  That  the  instrument  is  genuine  and  in  all  respects  what  it 
purports  to  be; 

2.  That  he  has  a  good  title  to  it; 

3.  That  all  prior  parties  had  capacity  to  contract; 

4.  That  he  has  no  knowledge  of  any  fact  which  would  impair  the 
validity  of  the  instrument  or  render  it  valueless. 

But  when  the  negotiation  is  by  delivery  only  the  warranty  extends 
in  favor  of  no  holder  other  than  the  immediate  transferee. 

The  provisions  of  subdivision  three  of  this  section  do  not  apply 
to  persons  negotiating  public  or  corporate  securities,  other  than  bills 
and  notes. 

Sect.  83.  Every  indorser  who  indorses  without  qualification  war- 
rants to  all  subsequent  holders  in  due  course: 

1.  The  matters  and  things  mentioned  in  subdivision  one,  two  and 
three  of  the  next  preceding  section;   and 

2.  That  the  instrument  is  at  the  time  of  his  indorsement  valid 
and  subsisting. 

And,  in  addition,  he  engages  that  on  due  presentment  it  shall  be 
accepted  or  paid,  or  both,  as  the  case  may  be,  according  to  its  tenor, 
and  that  if  it  is  dishonored,  and  the  necessary  proceedings  on  dishonor 
are  duly  taken,  he  will  pay  the  amount  thereof  to  the  holder  or  to 
any  subsequent  indorser  who  may  be  compelled  to  pay  it. 

Sect.  84.  "^^Hiere  a  person  places  his  indorsement  on  an  instrument 
negotiable  by  delivery  he  incurs  all  the  liability  of  an  indorser. 

Sect.  85.  As  respects  one  another  indorsers  are  liable  prima  facie 
in  the  order  in  which  they  indorse;  but  evidence  is  admissible  to 
show  that  as  between  or  among  themselves  thev  have  agreed  other- 
wise. Joint  payees  or  joint  indorsees  who  indorse  are  deemed  to 
indorse  jointly  and  severally. 

Sect.  80.  Where  a  broker  or  other  agent  negotiates  an  instrum.ent 
without  indorsement  he  incurs  all  the  liabilities  prescribed  by  section 

31 


482  NEGOTIABLE   INSTRUMENTS   LAW. 

eighty-two,  unless  he  discloses  the  name  of  his  principal  and  the 
fact  that  he  is  acting  only  as  agent. 


Presentment  for  Payment. 

Sect.  87.  Presentment  for  payment  is  not  necessary  in  order  to 
charge  the  person  primarily  liable  on  the  instrument;  but  if  the 
instrument  is  by  its  terms  payable  at  a  special  place,  and  he  is  able 
and  willing  to  pay  it  there  at  maturity,  such  ability  and  willingness 
are  equivalent  to  a  tender  of  payment  upon  his  part.  But  except  as 
herein  otherwise  provided  presentment  for  payment  is  necessary  in 
order  to  charge  the  drawer  and  indorsers. 

Sect.  88.  Where  the  instrument  is  not  payable  on  demand  pre- 
sentment must  be  made  on  the  day  it  falls  due.  Where  it  is  payable 
on  demand  presentment  must  be  made  within  a  reasonable  time  after 
its  issue,  except  that  in  the  case  of  a  bill  of  exchange  presentment 
for  payment  will  be  sufficient  if  made  within  a  reasonable  time  after 
the  last  negotiation  thereof. 

Sect.  89.  Presentment  for  payment,  to  be  sufficient,  must  be 
made : 

1.  By  the  holder,  or  by  some  person  authorized  to  receive  payment 
on  his  behalf ; 

2.  At  a  reasonable  hour  on  a  business  day; 

3.  At  a  proper  place  as  herein  defined; 

4.  To  the  person  primarily  liable  on  the  instrument,  or,  if  he  is 
absent  or  inaccessible,  to  any  person  found  at  the  place  where  the 
presentment  is  made. 

Sect.  90.    Presentment  for  payment  is  made  at  the  proper  place: 

1.  A^Tiere  a  place  of  payment  is  specified  in  the  instrument  and 
it  is  there  presented; 

2.  Where  no  place  of  payment  is  specified,  but  the  address  of  the 
person  to  make  payment  is  given  in  the  instrument  and  it  is  there 
presented ; 

3.  Where  no  place  of  payment  is  specified  and  no  address  is  given 
and  the  instrument  is  presented  at  the  usual  place  of  business  or 
residence  of  the  person  to  make  payment; 

4.  In  any  other  case,  if  presented  to  the  person  to  make  payment 
wherever  he  can  be  found,  or  if  presented  at  his  last  known  place  of 
business  or  residence. 

Sect.  91.  The  instrument  must  be  exhibited  to  the  person  from 
whom  payment  is  demanded,  and  when  it  is  paid  must  be  delivered 
up  to  the  party  paying  it. 

Sect.  92.  Where  the  instrument  is  payable  at  a  bank  presentment 
for  payment  must  be  made  during  banking  hours,  unless  the  person 
to  make  payment  has  no  funds  there  to  meet  it  at  any  time  during 


NEGOTIABLE   INSTRUMENTS,   IN   GENERAL.  483 

the  day,  in  which  case  presentment  at  any  hour  before  the  bank  is 
closed  on  that  day  is  sufficient. 

Sect.  93,  Where  the  person  primarily  liable  on  the  instrument 
is  dead,  and  no  place  of  payment  is  specified,  presentment  for  pay- 
ment must  be  made  to  his  personal  representative,  if  there  is  any  such, 
and  if,  with  the  exercise  of  reasonable  diligence,  he  can  be  found. 

Sect.  94.  Where  the  persons  primarily  liable  on  the  instrument 
are  liable  as  partners,  and  no  place  of  payment  is  spe-cified,  present- 
ment for  payment  may  be  made  to  any  one  of  them,  even  though 
there  has  been  a  dissolution  of  the  firm. 

Sect.  95.  Where  there  are  several  persons,  not  partners,  primarily 
liable  on  the  instrument,  and  no  place  of  payment  is  specified,  pre- 
sentment must  be  made  to  them  all. 

Sect.  96.  Presentment  for  payment  is  not  required  in  order  to 
charge  the  drawer  where  he  has  no  right  to  expect  or  require  that 
the  drawee  or  acceptor  will  pay  the  instrument. 

Sect.  97.  Presentment  for  payment  is  not  required  in  order  to 
charge  an  indorser  where  the  instrument  was  made  or  accepted  for 
his  accommodation,  and  he  has  no  reason  to  expect  that  the  instru- 
ment will  be  paid  if  presented. 

Sect.  98.  Delay  in  making  presentment  for  payment  is  excused 
when  the  delay  is  caused  by  circumstances  beyond  the  control  of  the 
holder,  and  not  imputable  to  his  default,  misconduct  or  negligence. 
When  the  cause  of  delay  ceases  to  operate  presentment  must  be  made 
with  reasonable  diligence. 

Sect.  99.    Presentment  for  payment  is  dispensed  with: 

1.  ^Miere  after  the  exercise  of  reasonable  diligence  presentment 
cannot  be  made; 

2.  Where  the  drawee  is  a  fictitious  person; 

3.  By  waiver  of  presentment,  express  or  implied. 

Sect.  100.    The  instrument  is  dishonored  by  non-payment  when: 

1.  It  is  duly  presented  for  payment  and  payment  is  refused  or 
cannot  be  obtained;   or 

2.  Presentment  is  excused  and  the  instrument  is  overdue  and 
unpaid. 

Sect.  101.  Subject  to  the  provisions  of  sections  eighteen  to  two 
hundred  and  twelve,  inclusive,  when  the  instrument  is  dishonored  by 
non-pa^Tuent,  an  immediate  right  of  recourse  to  all  parties  second- 
arily liable  thereon  accrues  to  the  holder. 

Sect.  102.  Every  negotiable  instrument  is  payable  at  the  time 
fixed  therein  without  grace,  except  that  three  days  of  grace^ shall  be 
allowed  upon  a  draft  or  bill  of  exchange  made  payable  within  this 
commonwealth  at  sight,  unless  there  is  an  express  stipulation  to  the 
contrarv.  When  the  day  of  maturity  falls  upon  Sunday  or  a  holiday 
the  instrument  is  payable  on  the  next  succeeding  business  day. 
Instruments  falling  due  or  payable  on  Saturday  are  to  be  presented 


48-4  NEGOTIABLE   INSTRUMENTS   LAW. 

for  payment  on  the  next  succeeding  business  day,  except  that  instru- 
ments parable  on  demand  may,  at  the  option  of  the  holder,  be 
presented  for  payment  before  twelve  o'clock  noon  on  Saturday,  when 
that  entire  day  is  not  a  holiday. 

Sect.  103.  Where  the  instrument  is  payable  at  a  fixed  period 
after  date,  after  sight,  or  after  the  happening  of  a  specified  event,  the 
time  of  payment  is  determined  by  excluding  the  day  from  which  the 
time  is  to  begin  to  run,  and  by  including  the  date  of  payment. 

Sect.  104.  Where  the  instrument  is  made  payable  at  a  bank  it 
is  equivalent  to  an  order  to  the  bank  to  pay  the  same  for  the  account 
of  the  principal  debtor  thereon. 

Sect.  105.  Payment  is  made  in  due  course  when  it  is  made  at 
or  after  the  maturity  of  the  instrument  to  the  holder  thereof  in  good 
faith  and  without  notice  that  his  title  is  defective. 

Notice  of  Dishonor. 

Sect.  106.  Except  as  herein  otherwise  provided,  when  a  negotiable 
instrument  has  been  dishonored  by  non-acceptance  or  non-payment, 
notice  of  dishonor  must  be  given  to  the  drawer  and  to  each  indorser, 
and  any  drawer  or  indorser  to  whom  such  notice  is  not  given  is 
discharged. 

Sect.  107.  The  notice  may  be  given  by  or  on  behalf  of  the  holder, 
or  by  or  on  behalf  of  any  party  to  the  instrument  who  might  be 
compelled  to  pay  it  to  the  holder,  and  who,  upon  taking  it  up,  would 
have  a  right  to  reimbursement  from  the  party  to  whom  the  notice 
is  given. 

Sect.  108.  ISTotice  of  dishonor  may  be  given  by  an  agent  either 
in  his  own  name  or  in  the  name  of  any  party  entitled  to  give  notice, 
whether  that  party  is  his  principal  or  not. 

Sect.  109.  Where  notice  is  given  by  or  on  behalf  of  the  holder 
it  enures  for  the  benefit  of  all  subsequent  holders  and  all  prior  parties 
who  have  a  right  of  recourse  against  the  party  to  whom  it  is  given. 

Sect.  110.  "VAHiere  notice  is  given  by  or  on  behalf  of  a  party  en- 
titled to  give  notice  it  enures  for  the  benefit  of  the  holder  and  all 
parties  subsequent  to  the  party  to  whom  notice  is  given. 

Sect.  111.  Wliere  the  instrument  has  been  dishonored  in  the 
hands  of  an  agent  he  may  either  himself  give  notice  to  the  parties 
liable  thereon,  or  he  may  give  notice  to  his  principal.  If  he  gives 
notice  to  his  principal  he  must  do  so  within  the  same  time  as  if  he 
were  the  holder,  and  the  principal  upon  the  receipt  of  such  notice 
has  himself  the  same  time  for  giving  notice  as  if  the  agent  had  been 
an  independent  holder. 

Sect.  112.  A  written  notice  need  not  be  signed  and  an  insuffi- 
cient written  notice  mav  be  supplemented  and  validated  by  verbal 
communication.    A  misdescription  of  the  instrument  does  not  vitiate 


NEGOTIABLE   INSTRUMENTS,   IN   GENERAL.  485 

the  notice  unless  the  part}^  to  whom  the  notice  is  given  is  in  fact 
misled  thereby. 

Sect.  113.  The  notice  may  be  in  writing  or  merely  oral,  and 
may  be  given  in  any  terms  which  sufficiently  identify  the  instrument 
and  indicate  that  it  has  been  dishonored  by  non-acceptance  or  non- 
payment. It  may  in  all  cases  be  given  by  delivering  it  personally  or 
through  the  mails. 

Sect.  114.  Xotice  of  dishonor  may  be  given  either  to  the  party 
himself  or  to  his  agent  in  that  behalf. 

Sect.  115.  ^^lien  any  party  is  dead,  and  his  death  is  known 
to  the  party  giving  notice,  the  notice  must  be  given  to  a  personal 
representative,  if  there  is  one,  and  if  with  reasonable  diligence  he 
can  be  found.  If  there  is  no  personal  representative  notice  may  be 
sent  to  the  last  residence  or  last  place  of  business  of  the  deceased. 

Sect.  116.  Where  the  parties  to  be  notified  are  partners  notice 
to  any  one  partner  is  notice  to  the  firm,  even  though  there  has  been 
a  dissolution. 

Sect.  117.  Notice  to  joint  parties  who  are  not  partners  must  be 
given  to  each  of  them,  unless  one  of  them  has  authority  to  receive 
such  notice  for  the  others. 

Sect.  118.  Where  a  party  has  been  adjudged  a  bankrupt  or  an 
insolvent,  or  has  made  an  assignment  for  the  benefit  of  creditors, 
notice  may  be  given  either  to  the  party  himself  or  to  his  trustee  or 
assignee. 

Sect.  119.  Notice  may  be  given  as  soon  as  the  instrument  is 
dishonored ;  and  imless  delay  is  excused  as  hereinafter  provided  must 
be  given  within  the  times  fixed  by  sections  eighteen  to  two  hundred 
and  twelve,  inclusive. 

Sect.  120.  Where  the  person  giving  and  the  person  to  receive 
notice  reside  in  the  same  place  notice  must  be  given  within  the 
following  times: 

1.  If  given  at  the  place  of  business  of  the  person  to  receive  notice 
it  must  be  given  before  the  close  of  business  hours  on  the  day 
following ; 

2.  If  given  at  his  residence  it  must  be  given  before  the  usual  hours 
of  rest  on  the  day  following; 

3.  If  sent  by  mail  it  must  be  deposited  in  the  post-office  in  time 
to  reach  him  in  usual  course  on  the  day  following. 

Sect.  121.  Where  the  person  giving  and  the  person  to  receive 
notice  reside  in  different  places  the  notice  must  be  given  within  the 
following  times : 

1.  If  sent  by  mail  it  must  be  deposited  in  the  post-office  in  time 
to  go  hy  mail  the  day  following  the  day  of  dishonor,  or  if  there  is 
no  mail  at  a  convenient  hour  on  that  da}^  by  the  next  mail  there- 
after. 

2.  If  given  otherwise  than  through  the  post-office,  then  within 


486  NEGOTIABLE   INSTRUMENTS   LAW. 

the  time  that  notice  would  have  been  received  in  due  course  of  mail 
if  it  had  been  deposited  in  the  post-office  within  the  time  specified 
in  the  last  sub-division. 

Sect.  122.  Where  notice  of  dishonor  is  duly  addressed  and  de- 
posited in  the  post-office  the  sender  is  deemed  to  have  given  due 
notice,  notwithstanding  any  miscarriage  in  the  mails. 

Sect.  123.  Notice  is  deemed  to  have  been  deposited  in  the  post- 
office  when  deposited  in  any  branch  post-office  or  in  any  letter  box 
under  the  control  of  the  post-office  department. 

Sect.  124,  Where  a  party  receives  notice  of  dishonor  he  has,  after 
the  receipt  of  such  notice,  the  same  time  for  giving  notice  to  ante- 
cedent parties  that  the  holder  has  after  the  dishonor. 

Sect.  125.  Where  a  party  has  added  an  address  to  his  signature 
notice  of  dishonor  must  be  sent  to  that  address;  but  if  he  has  not 
given  such  address  then  the  notice  must  be  sent  as  follows : 

1.  Either  to  the  post-office  nearest  to  his  place  of  residence,  or 
to  the  post-office  where  he  is  accustomed  to  receive  his  letters;    or 

2.  If  he  lives  in  one  place,  and  has  his  place  of  business  in  another, 
notice  may  be  sent  to  either  place;  or 

3.  If  he  is  sojourning  in  another  place  notice  may  be  sent  to  the 
place  where  he  is  so  sojourning. 

But  where  the  notice  is  actually  received  by  the  party  within  the 
time  specified  in  sections  eighteen  to  two  hundred  and  twelve,  in- 
clusive, it  will  be  sufficient,  though  not  sent  in  accordance  with  the 
requirements  of  this  section. 

Sect.  126.  Notice  of  dishonor  may  be  waived,  either  before  the 
time  of  giving  notice  has  arrived,  or  after  the  omission  to  give  due 
notice,  and  the  waiver  may  be  express  or  implied. 

Sect.  127.  Where  the  waiver  is  embodied  in  the  instrument  it- 
self it  is  binding  upon  all  parties ;  but  where  it  is  written  above  the 
signature  of  an  indorser  it  binds  him  only. 

Sect.  128.  A  waiver  of  protest,  whether  in  the  case  of  a  foreign 
bill  of  exchange  or  other  negotiable  instrument,  is  deemed  to  be  a 
waiver  not  only  of  a  formal  protest  but  also  of  presentment  and  notice 
of  dishonor. 

Sect.  129.  Notice  of  dishonor  is  dispensed  with  when,  after  the 
exercise  of  reasonable  diligence,  it  cannot  be  given  to  or  does  not 
reach  the  parties  sought  to  be  charged. 

Sect.  130.  Delay  in  giving  notice  of  dishonor  is  excused  when 
the  delay  is  caused  by  circumstances  beyond  the  control  of  the  holder 
and  not  imputable  to  his  default,  misconduct  or  negligence.  When 
the  cause  of  delay  ceases  to  operate  notice  must  be  given  with  reason- 
able diligence. 

Sect.  131.  Notice  of  dishonor  is  not  required  to  be  given  to  the 
drawer  in  either  of  the  following  cases: 

1.    Where  the  drawer  and  drawee  are  the  same  person; 


NEGOTIABLE   INSTRUMENTS,   IN   GENERAL.  487 

2.  Where  the  drawee  is  a  fictitious  person  or  a  person  not  having 
capacity  to  contract; 

3.  Where  the  drawer  is  the  person  to  whom  the  instrument  is 
presented  for  payment; 

4.  Where  the  drawer  has  no  right  to  expect  or  require  that  the 
drawee  or  acceptor  will  honor  the  instrument ; 

5.  Where  the  drawer  has  countermanded  payment. 

Sect.  132.  Notice  of  dishonor  is  not  required  to  be  given  to  an 
indorser  in  either  of  the  following  cases: 

1.  Where  the  drawee  is  a  fictitious  person  or  a  person  not  having 
capacity  to  contract,  and  the  indorser  was  aware  of  the  fact  at  the 
time  he  indorsed  the  instrument; 

2.  WTiere  the  indorser  is  the  person  to  whom  the  instrument  is 
presented  for  payment; 

3.  Where  the  instrument  was  made  or  accepted  for  his  accommo- 
dation. 

Sect.  133.  Where  due  notice  of  dishonor  by  non-acceptance  has 
been  given  notice  of  a  subsequent  dishonor  by  non-payment  is  not 
necessary,  unless  in  the  meantime  the  instrument  has  been  accepted. 

Sect.  134.  An  omission  to  give  notice  of  dishonor  by  non- 
acceptance  does  not  prejudice  the  rights  of  a  holder  in  due  course 
subsequent  to  the  omission. 

Sect.  135.  Where  any  negotiable  instrument  has  been  dishonored 
it  may  be  protested  for  non-acceptance  or  non-payment  as  the  case 
may  be ;  but  protest  is  not  required,  except  in  the  case  of  foreign  bills 
of  exchange. 

Discharge. 

Sect.  136.    A  negotiable  instrument  is  discharged: 

1.  By  payment  in  due  course  by  or  on  behalf  of  the  principal 
debtor ; 

2.  By  payment  in  due  course  by  the  party  accommodated,  where 
the  instrument  is  made  or  accepted  for  accommodation ; 

3.  By  the  intentional  cancellation  thereof  by  the  holder; 

4.  By  any  other  act  which  will  discharge  a  simple  contract  for 
the  pa}Tnent  of  money; 

5.  When  the  principal  debtor  becomes  the  holder  of  the  instrument 
at  or  after  maturity  in  his  own  right. 

Sect.  137.  A  person  secondarily  liable  on  the  instrument  is 
discharged : 

1.  By  any  act  which  discharges  the  instrument; 

2.  By  the  intentional  cancellation  of  his  signature  by  the  holder; 

3.  By  the  discharge  of  a  prior  party; 

4.  By  a  valid  tender  of  payment  made  by  a  prior  party ; 

5.  By  a  release  of  the  principal  debtor,  unless  the  holder's  right 
of  recourse  against  the  party  secondarily  liable  is  expressly  reserved. 


488  NEGOTIABLE   INSTRUMENTS   LAW. 

6.  By  any  agreement  binding  upon  the  holder  to  extend  the  time 
of  payment,  or  to  postpone  the  holder's  right  to  enforce  the  instru- 
ment, unless  made  with  the  assent  of  the  party  secondarily  liable, 
or  unless  the  right  of  recourse  against  such  party  is  expressly 
reserved. 

Sect.  138.  Where  the  instrument  is  paid  by  a  party  secondarily 
liable  thereon  it  is  not  discharged;  but  the  party  so  paying  it  is 
remitted  to  his  former  rights  as  regards  all  prior  parties,  and  he  may 
strike  out  his  own  and  all  subsequent  indorsements,  and  again 
negotiate  the  instrument,  except: 

1.  Where  it  is  payable  to  the  order  of  a  third  person,  and  has 
been  paid  by  the  drawer;   and 

2.  Where  it  was  made  or  accepted  for  accommodation,  and  has 
been  paid  by  the  party  accommodated. 

Sect.  139.  The  holder  may  expressly  renounce  his  rights  against 
any  party  to  the  instrument,  before,  at,  or  after  its  maturity.  An 
absolute  and  unconditional  renunciation  of  his  rights  against  the 
principal  debtor  made  at  or  after  the  maturity  of  the  instrument 
discharges  the  instrument.  But  a  renunciation  does  not  affect  the 
rights  of  a  holder  in  due  course  without  notice.  A  renunciation 
must  be  in  writing,  unless  the  instrument  is  delivered  up  to  the 
person  primarily  liable  thereon. 

Sect.  140.  A  cancellation  made  unintentionally,  or  under  a  mis- 
take, or  without  the  authority  of  the  holder,  is  inoperative;  but 
where  an  instrument  or  any  signature  thereon  appears  to  have  been 
cancelled  the  burden  of  proof  lies  on  the  party  who  alleges  that  the 
cancellation  was  made  unintentionally,  or  under  a  mistake  or  without 
authority. 

Sect.  141.  Where  a  negotiable  instrument  is  materially  altered 
without  the  assent  of  all  parties  liable  thereon  it  is  avoided,  except 
as  against  a  party  who  has  himself  made,  authorized  or  assented  to 
the  alteration,  and  subsequent  indorsers. 

But  when  an  instrument  has  been  materially  altered  and  is  in  the 
hands  of  a  holder  in  due  course,  not  a  party  to  the  alteration,  he  may 
enforce  payment  thereof  according  to  its  original  tenor. 

Sect,  142.    Any  alteration  which  changes: 

1.  The  date; 

2.  The  sum  payable,  either  for  principal  or  interest; 

3.  The  time  or  place  of  payment; 

4.  The  number  or  the  relations  of  the  parties; 

5.  The  medium  or  currency  in  which  payment  is  to  be  made; 

Or  which  adds  a  place  of  payment  where  no  place  of  payment  is 
specified,  or  any  other  change  or  addition  which  alters  the  effect  of 
the  instrument  in  any  respect  is  a  material  alteration. 


BILLS   OF   EXCHANGE.  489 


BILLS    OF    EXCHANGE. 

Form  and  Interpretation. 

Sect.  143.  A  bill  of  exchange  is  an  unconditional  order  in  writ- 
ing addressed  by  one  person  to  another,  signed  by  the  person  giving 
it,  requiring  the  person  to  whom  it  is  addressed  to  pay  on  demand 
or  at  a  fixed  or  determinable  future  time  a  sum  certain  in  money 
to  order  or  to  bearer. 

Sect.  144.  A  bill  of  itself  does  not  operate  as  an  assignment  of 
the  funds  in  the  hands  of  the  drawee  available  for  the  payment 
thereof  and  the  drawee  is  not  liable  on  the  bill  unless  and  until  he 
accepts  the  same. 

Sect.  145.  A  bill  may  be  addressed  to  two  or  more  drawees 
jointly  whether  they  are  partners  or  not;  but  not  to  two  or  more 
drawees  in  the  alternative  or  in  succession. 

Sect.  146.  An  inland  bill  of  exchange  is  a  bill  which  is,  or  on 
its  face  purports  to  be,  both  drawn  and  payable  within  this  common- 
wealth. Any  other  bill  is  a  foreign  bill.  Unless  the  contrary  appears 
on  the  face  of  the  bill  the  holder  may  treat  it  as  an  inland  bill. 

Sect.  147.  Where  in  a  bill  drawer  and  drawee  are  the  same  person, 
or  where  the  drawee  is  a  fictitious  person,  or  a  person  not  having 
capacity  to  contract,  the  holder  may  treat  the  instrument,  at  his 
option,  either  as  a  bill  of  exchange  or  a  promissory  note. 

Sect.  148.  The  drawer  of  a  bill  and  any  indorser  may  insert 
thereon  the  name  of  a  person  to  whom  the  holder  may  resort  in  case 
of  need,  that  is  to  say,  in  case  the  bill  is  dishonored  by  non-acceptance 
or  non-payment.  Such  person  is  called  the  referee  in  case  of  need. 
It  is  in  the  option  of  the  holder  to  resort  to  the  referee  in  case  of 
need,  or  not,  as  he  may  see  fit. 

Acceptance. 

Sect.  149.  The  acceptance  of  a  bill  is  the  signification  by  the 
drawee  of  his  assent  to  the  order  of  the  drawer.  The  acceptance 
must  be  in  writing  and  signed  by  the  drawee.  It  must  not  express 
that  the  drawee  will  perform  his  promise  by  any  other  means  than 
the  payment  of  money. 

Sect.  150.  The  holder  of  a  bill  presenting  the  same  for  acceptance 
may  require  the  acceptance  to  be  written  on  the  bill  and,  if  such 
request  is  refused,  may  treat  the  bill  as  dishonored. 

Sect.  151.  Where  an  acceptance  is  written  on  a  paper  other  than 
the  bill  itself  it  does  not  bind  the  acceptor  except  in  favor  of  a 
person  to  whom  it  is  shown  and  who,  on  the  faith  thereof,  receives 
the  bill  for  value. 


490  NEGOTIABLE   INSTRUMENTS   LAW. 

Sect.  152.  An  unconditional  promise  in  writing  to  accept  a 
bill  before  it  is  drawn  is  deemed  an  actual  acceptance  in  favor  of 
every  person  who,  upon  the  faith  thereof,  receives  the  bill  for  value. 

Sect.  153.  The  drawee  is  allowed  twenty-four  hours  after  pre- 
sentment in  which  to  decide  whether  or  not  he  will  accept  the  bill; 
but  the  acceptance,  if  given,  dates  as  of  the  day  of  presentation. 

Sect.  15-1.  Where  a  drawee  to  whom  a  bill  is  delivered  for  ac- 
ceptance destroys  the  same,  or  refuses  within  twenty-four  hours  after 
such  delivery,  or  within  such  other  period  as  the  holder  may  allow, 
to  return  the  bill  accepted  or  non-accepted  to  the  holder,  he  will  be 
deemed  to  have  accepted  the  same. 

Sect.  155.  A  bill  may  be  accepted  before  it  has  been  signed  by 
the  drawer,  or  while  otherwise  incomplete,  or  when  it  is  overdue,  or 
after  it  has  been  dishonored  by  a  previous  refusal  to  accept,  or  by 
non-pa}Tuent.  But  when  a  bill  payable  after  sight  is  dishonored  by 
non-acceptance  and  the  drawee  subsequently  accepts  it,  the  holder, 
in  the  absence  of  any  different  agreement,  is  entitled  to  have  the  bill 
accepted  as  of  the  date  of  the  first  presentment. 

Sect.  156.  An  acceptance  is  either  general  or  qualified.  A  gen- 
eral acceptance  accepts  without  qualification  to  the  order  of  the 
drawer.  A  qualified  acceptance  in  express  terms  varies  the  effect  of 
the  bill  as  drawn. 

Sect.  157.  An  acceptance  to  pay  at  a  particular  place  is  a  gen- 
eral acceptance  unless  it  expressly  states  that  the  bill  is  to  be  paid 
there  only  and  not  elsewhere. 

Sect.  158.    An  acceptance  is  qualified  which  is: 

1.  Conditional,  that  is  to  say,  which  makes  payment  by  the 
acceptor  dependent  on  the  fulfilment  of  a  condition  therein  stated; 

2.  Partial,  that  is  to  say,  an  acceptance  to  pay  part  only  of  the 
amount  for  which  the  bill  is  drawn; 

3.  Local,  that  is  to  say,  an  acceptance  to  pay  only  at  a  particular 
place ; 

4.  Qualified  as  to  time; 

5.  The  acceptance  of  some  one  or  more  of  the  drawees,  but  not 
of  all. 

Sect.  159.  The  holder  may  refuse  to  take  a  qualified  acceptance, 
and,  if  he  does  not  obtain  an  unqualified  acceptance,  he  may  treat  the 
bill  as  dishonored  by  non-acceptance.  "Where  a  qualified  acceptance 
is  taken  the  drawer  and  indorsers  are  discharged  from  liability  on 
the  bill,  unless  they  have  expressly  or  impliedly  authorized  the  holder 
to  take  a  qualified  acceptance,  or  subsequently  assent  thereto.  When 
the  drawer  or  an  indorser  receives  notice  of  a  qualified  acceptance 
he  must  within  a  reasonable  time  express  his  dissent  to  the  holder, 
or  he  will  be  deemed  to  have  assented  thereto. 


BILLS   OF   EXCHANGE.  491 


Presentment  for  Acceptance. 

Sect.  160,    Presentment  for  acceptance  must  be  made: 

1.  Where  the  bill  is  payable  after  sight,  or  in  any  other  case 
where  presentment  for  acceptance  is  necessary  in  order  to  fix  the 
maturity  of  the  instrument;    or 

2.  Where  the  bill  expressly  stipulates  that  it  shall  be  presented 
for  acceptance;   or 

3.  Where  the  bill  is  drawn  payable  elsewhere  than  at  the  resi- 
dence or  place  of  business  of  the  drawee. 

In  no  other  case  is  presentment  for  acceptance  necessary  in  order 
to  render  any  party  to  the  bill  liable. 

Sect.  161.  Except  as  herein  otherwise  provided  the  holder  of  a 
bill  which  is  required  by  the  next  preceding  section  to  be  presented 
for  acceptance  must  either  present  it  for  acceptance  or  negotiate  it 
within  a  reasonable  time.  If  he  fails  to  do  so  the  drawer  and  all 
indorsers  are  discharged. 

Sect.  162.  Presentment  for  acceptance  must  be  made  by  or  on 
behalf  of  the  holder  at  a  reasonable  hour,  on  a  business  day  and 
before  the  bill  is  overdue,  to  the  drawee  or  some  person  authorized 
to  accept  or  refuse  acceptance  on  his  behalf:   and 

1.  Where  a  bill  is  addressed  to  two  or  more  drawees  who  are  not 
partners  presentment  must  be  made  to  them  all,  unless  one  has 
authority  to  accept  or  refuse  acceptance  for  all,  in  which  case  pre- 
sentment may  be  made  to  him  only; 

2.  Where  the  drawee  is  dead  presentment  may  be  made  to  his 
personal  representative ; 

3.  Wliere  the  drawee  has  been  adjudged  a  bankrupt  or  an  in- 
solvent, or  has  made  an  assignment  for  the  benefit  of  creditors,  pre- 
sentment may  be  made  to  him  or  to  his  trustee  or  assignee. 

Sect.  163.  A  bill  may  be  presented  for  acceptance  on  any  day 
on  which  negotiable  instruments  may  be  presented  for  payment 
under  the  provisions  of  sections  eighty-nine  and  one  hundred  and 
two.  When  Saturday  is  not  otherwise  a  holiday  presentment  for 
acceptance  may  be  made  before  twelve  o'clock  noon  on  that  day. 

Sect.  164.  Where  the  holder  of  a  bill  drawn  payal)le  elsewhere 
than  at  the  place  of  business  or  the  residence  of  the  drawee  has 
not  time  with  the  exercise  of  reasonable  diligence  to  present  the  bill 
for  acceptance  before  presenting  it  for  payment  on  the  day  that  it 
falls  due,  the  delay  caused  by  presenting  the  bill  for  acceptance  before 
presenting  it  for  payment  is  excused  and  does  not  discharge  the  draw- 
ers and  indorsers. 

Sect.  165,  Presentment  for  acceptance  is  excused  and  a  bill  may 
be  treated  as  dishonored  by  non-acceptance,  in  either  of  the  following 
cases : 


492  NEGOTIABLE   INSTRUMENTS   LAW. 

1.  "Wlicre  the  drawee  is  dead,  or  has  absconded,  or  is  a  fictitious 
person  or  a  person  not  having  capacity  to  contract  by  bill ; 

2.  Where,  after  the  exercise  of  reasonable  diligence,  presentment 
cannot  be  made; 

3.  Where,  although  presentment  has  been  irregular,  acceptance 
has  been  refused  on  some  other  ground. 

Sect.  166.    A  bill  is  dishonored  by  non-acceptance: 

1.  When  it  is  duly  presented  for  acceptance  and  such  an  accept- 
ance as  is  prescribed  by  sections  eighteen  to  two  hundred  and  twelve, 
inclusive,  is  refused  or  cannot  be  obtained;  or 

2.  When  presentment  for  acceptance  is  excused  and  the  bill  is  not 
accepted. 

3.  Where,  although  presentment  has  been  irregular,  acceptance 
has  been  refused  on  some  other  ground. 

Sect.  167.  Where  a  bill  is  duly  presented  for  acceptance  and 
is  not  accepted  within  the  prescribed  time  the  person  presenting  it 
must  treat  the  bill  as  dishonored  by  non-acceptance  or  he  loses  the 
right  of  recourse  against  the  drawer  and  the  indorsers. 

Sect.  168.  When  a  bill  is  dishonored  by  non-acceptance  an  im- 
mediate right  of  recourse  against  the  drawers  and  indorsers  accrues 
to  the  holder  and  no  presentment  for  payment  is  necessary. 

Protest. 

Sect.  169.  Where  a  foreign  bill  appearing  on  its  face  to  be 
such  is  dishonored  by  non-acceptance  it  must  be  duly  protested  for 
non-acceptance,  and  where  such  a  bill  which  has  not  previously  been 
dishonored  by  non-acceptance  is  dishonored  by  non-payment  it  must 
be  duly  protested  for  non-payment.  If  it  is  not  so  protested  the 
drawer  and  indorsers  are  discharged.  Where  a  bill  does  not  appear 
on  its  face  to  be  a  foreign  bill  protest  thereof  in  case  of  dishonor  is 
unnecessary. 

Sect.  170.  The  protest  must  be  annexed  to  the  bill,  or  must 
contain  a  copy  thereof,  and  must  be  under  the  hand  and  seal  of  the 
notary  making  it,  and  must  specify: 

1.  The  time  and  place  of  presentment; 

2.  The  fact  that  presentment  was  made  and  the  manner  thereof ; 

3.  The  cause  or  reason  for  protesting  the  bill; 

4.  The  demand  made  and  the  answer  given,  if  any,  or  the  fact 
that  the  drawee  or  acceptor  could  not  be  found. 

Sect.  171.    Protest  may  be  made  by: 

1.  A  notary  public;    or 

2.  By  any  respectable  resident  of  the  place  where  the  bill  is 
dishonored,  in  the  presence  of  two  or  more  credible  witnesses. 

Sect.  172.  When  a  bill  is  protested  such  protest  must  be  made 
on  the  day  of  its  dishonor,  unless  delay  is  excused  as  herein  provided. 


BILLS   OF   EXCHANGE.  493 

When  a  bill  has  been  duly  noted  the  protest  may  be  subsequently 
extended  as  of  the  date  of  the  noting. 

Sect.  173.  A  bill  must  be  protested  at  the  place  where  it  is 
dishonored,  except  that  when  a  bill  drawn  payable  at  the  place  of 
business  or  residence  of  some  person  other  than  the  drawee  has  been 
dishonored  by  non-acceptance  it  must  be  protested  for  non-payment 
at  the  place  where  it  is  expressed  to  be  payable,  and  no  further  pre- 
sentment for  payment  to,  or  demand  on,  the  drawee  is  necessary. 

Sect.  174.  A  bill  which  has  been  protested  for  non-acceptance 
may  be  subsequently  protested  for  non-payment. 

Sect.  175.  Where  the  acceptor  has  been  adjudged  a  bankrupt  or 
an  insolvent,  or  has  made  an  assignment  for  the  benefit  of  creditors, 
before  the  bill  matures,  the  holder  may  cause  the  bill  to  be  protested 
for  better  security  against  the  drawer  and  indorsers. 

Sect.  176.  Protest  is  dispensed  with  by  any  circumstances  which 
would  dispense  with  notice  of  dishonor.  Delay  in  noting  or  pro- 
testing is  excused  when  delay  is  caused  by  circumstances  beyond  the 
control  of  the  holder  and  not  imputable  to  his  default,  misconduct, 
or  negligence.  When  the  cause  of  delay  ceases  to  operate  the  bill 
must  be  noted  or  protested  with  reasonable  diligence. 

Sect.  177.  Where  a  bill  is  lost  or  destroyed  or  is  wrongly  de- 
tained from  the  person  entitled  to  hold  it  protest  may  be  made  on 
a  copy  or  written  particulars  thereof. 

Acceptance  for  Honor. 

Sect.  178.  Where  a  bill  of  exchange  has  been  protested  for 
dishonor  by  non-acceptance  or  protested  for  better  security  and  is 
not  overdue,  any  person  not  being  a  party  already  liable  thereon 
may,  with  the  consent  of  the  holder,  intervene,  and  accept  the  bill 
supra  protest  for  the  honor  of  any  party  liable  thereon  or  for  the 
honor  of  the  person  for  whose  account  the  bill  is  drawn.  The  accept- 
ance for  honor  may  be  for  part  only  of  the  sum  for  which  the  bill 
is  drawn;  and  where  there  has  been  an  acceptance  for  honor  for 
one  party  there  may  be  a  further  acceptance  by  a  different  person 
for  the  honor  of  another  party. 

Sect.  179.  An  acceptance  for  honor  supra  protest  must  be  in 
writing  and  indicate  that  it  is  an  acceptance  for  honor,  and  must 
be  signed  by  the  acceptor  for  honor. 

Sect.  180.  Where  an  acceptance  for  honor  does  not  expressly 
state  for  whose  honor  it  is  made  it  is  deemed  to  be  an  acceptance 
for  the  honor  of  the  drawer. 

Sect.  181.  The  acceptor  for  honor  is  liable  to  the  holder  and  to 
all  parties  to  the  bill  subsequent  to  the  party  for  whose  honor  ho 
has  accepted. 

Sect,  183.    The  acceptor  for  honor  by  such  acceptance  engages 


494  NEGOTIABLE   INSTRUMENTS   LAW. 

that  he  will  on  due  presentment  pay  the  bill  according  to  the  terms 
of  his  acceptance,  provided  it  shall  not  have  been  paid  by  the  drawee, 
and  provided  also,  that  it  shall  have  been  duly  presented  for  payment 
and  protested  for  non-payment  and  notice  of  dishonor  given  to  him. 

Sect.  183.  Where  a  bill  payable  after  sight  is  accepted  for  honor 
its  maturity  is  calculated  from  the  date  of  the  noting  for  non- 
acceptance  and  not  from  the  date  of  the  acceptance  for  honor. 

Sect.  184.  Where  a  dishonored  bill  has  been  accepted  for  honor 
supra  protest  or  contains  a  reference  in  case  of  need  it  must  be 
protested  for  non-payment  before  it  is  presented  for  payment  to 
the  acceptor  for  honor  or  referee  in  case  of  need. 

Sect.  185.  Presentment  for  payment  to  the  acceptor  for  honor 
must  be  made  as  follows: 

1.  If  it  is  to  be  presented  in  the  place  where  the  protest  for  non- 
payment was  made  it  must  be  presented  not  later  than  the  day 
following  its  maturity; 

2.  If  it  is  to  be  presented  in  some  other  place  than  the  place  where 
it  was  protested  then  it  must  be  forwarded  within  the  time  specified 
in  section  one  hundred  and  twenty-one. 

Sect.  186.  The  provisions  of  section  ninety-eight  shall  apply 
where  there  is  delay  in  making  presentment  to  the  acceptor  for  honor 
or  referee  in  case  of  need. 

Sect.  187.  When  the  bill  is  dishonored  by  the  acceptor  for  honor 
it  must  be  protested  for  non-payment  by  him. 


Payment  for  Honor. 

Sect.  188.  Where  a  bill  has  been  protested  for  non-payment  any 
person  may  intervene  and  pay  it  supra  protest  for  the  honor  of  any 
person  liable  thereon  or  for  the  honor  of  the  person  for  whose  account 
it  was  drawn. 

Sect.  189.  The  payment  for  honor  supra  protest  in  order  to  oper- 
ate as  such  and  not  as  a  mere  voluntary  payment  must  be  attested  by 
a  notarial  act  of  honor  which  may  be  appended  to  the  protest  or 
form  an  extension  to  it. 

Sect.  190,  The  notarial  act  of  honor  must  be  founded  on  a 
declaration  made  by  the  payer  for  honor  or  by  his  agent  in  that 
behalf  declaring  his  intention  to  pay  the  bill  for  honor  and  for  whose 
honor  he  pays. 

Sect.  191.  Where  two  or  more  persons  offer  to  pay  a  bill  for  the 
honor  of  different  parties  the  person  whose  payment  will  discharge 
most  parties  to  the  bill  is  to  be  given  the  preference. 

Sect.  192.  Where  a  bill  has  been  paid  for  honor  all  parties  sub- 
sequent to  the  party  for  whose  honor  it  is  paid  are  discharged,  but 
the  payer  for  honor  is  subrogated  for,  and  succeeds  to,  both  the  rights 


BILLS   OF   EXCHANGE.  495 

and  duties  of  the  holder  as  regards  the  party  for  whose  honor  he  pays 
and  all  parties  liable  to  the  latter. 

Sect.  193.  Where  the  holder  of  a  bill  refuses  to  receive  payment 
supra  protest  he  loses  his  right  of  recourse  against  any  party  who 
would  have  been  discharged  by  such  payment. 

Sect.  194.  The  payer  for  honor,  on  paying  to  the  holder  the 
amount  of  the  bill  and  the  notarial  expenses  incidental  to  its  dis- 
honor, is  entitled  to  receive  both  the  bill  itself  and  the  protest. 

Bills  in  a  Set. 

Sect.  195.  Where  a  bill  is  drawn  in  a  set,  each  part  of  the  set 
being  numbered  and  containing  a  reference  to  the  other  parts,  the 
whole  of  the  parts  constitute  one  bill. 

Sect.  196.  Where  two  or  more  parts  of  a  set  are  negotiated  to 
different  holders  in  due  course  the  holder  whose  title  first  accrues 
is  as  between  such  holders  the  true  owner  of  the  bill.  But  nothing  in 
this  section  affects  the  rights  of  a  person  who  in  due  course  accepts 
or  pays  the  part  first  presented  to  him. 

Sect.  197.  Where  the  holder  of  a  set  indorses  two  or  more  parts 
to  different  persons  he  is  liable  on  every  such  part,  and  every  indorser 
subsequent  to  him  is  liable  on  the  part  he  has  himself  indorsed,  as  if 
such  parts  were  separate  bills. 

Sect.  198.  The  acceptance  may  be  written  on  any  part  and  it 
must  be  written  on  one  part  only.  If  the  drawee  accepts  more  than 
one  part,  and  such  accepted  parts  are  negotiated  to  different  holders 
in  due  course,  he  is  liable  on  ever}--  such  part  as  if  it  were  a  separate 
bill. 

Sect.  199.  When  the  acceptor  of  a  bill  drawn  in  a  set  pays  it 
without  requiring  the  part  bearing  his  acceptance  to  be  delivered  up 
to  him,  and  that  part  at  maturity  is  outstanding  in  the  hands  of  a 
holder  in  due  course,  he  is  liable  to  the  holder  thereon. 

Sect.  200.  Except  as  herein  otherv\'ise  provided  where  any  one 
part  of  a  bill  drawn  in  a  set  is  discharged  by  payment  or  otherwise 
the  whole  bill  is  discharged. 

Promissory  Notes  and  Cheques. 

Sect.  201.  A  negotiable  promissory  note  within  the  meaning 
of  sections  eighteen  to  two  hundred  and  twelve,  inclusive,  is  an  un- 
conditional promise  in  writing  made  by  one  person  to  another  signed 
by  the  maker,  engaging  to  pay  on  demand,  or  at  a  fixed  or  determi- 
nable future  time,  a  sum  certain  in  money  to  order  or  to  bearer. 
Where  a  note  is  drawn  to  the  maker's  own  order  it  is  not  complete 
until  indorsed  by  him. 

Sect.  302.    A  cheque  is  a  bill  of  exchange  drawn  on  a  bank  pay- 


496  NEGOTIABLE   INSTRUMENTS   LAW. 

able  on  demand.  Except  as  herein  otherwise  provided  the  provisions 
of  sections  eighteen  to  two  hundred  and  twelve,  inclusive,  applicable 
to  a  bill  of  exchange  payable  on  demand  apply  to  a  cheque. 

Si'CT.  203,  A  cheque  must  be  presented  for  payment  within  a 
reasonable  time  after  its  issue  or  the  drawer  will  be  discharged  from 
liability  thereon  to  the  extent  of  the  loss  caused  by  the  delay. 

Sect.  204.  Where  a  cheque  is  certified  by  the  bank  on  which  it  is 
drawn  the  certification  is  equivalent  to  an  acceptance. 

Sect.  205.  Where  the  holder  of  a  cheque  procures  it  to  be  accepted 
or  certified  the  drawer  and  all  indorsers  are  discharged  from  liability 
thereon. 

Sect.  206.  A  cheque  of  itself  does  not  operate  as  an  assignment 
of  any  part  of  the  funds  to  the  credit  of  the  drawer  with  tlie  bank, 
and  the  bank  is  not  liable  to  the  holder  unless  and  until  it  accepts 
or  certifies  the  cheque. 

Definitions  and  Rules. 

Sect.  207.  In  sections  eighteen  to  two  hundred  and  twelve,  in- 
clusive, unless  the  context  otherwise  requires : 

"  Acceptance "  means  an  acceptance  completed  by  delivery  or 
notification. 

"  Action  "  includes  counter-claim  and  set-off. 

"  Bank  "  includes  any  person  or  association  of  persons  carrying  on 
the  business  of  banking,  whether  incorporated  or  not. 

"  Bearer  "  means  the  person  in  possession  of  a  bill  or  note  which 
is  payable  to  bearer. 

"Bill"  means  bill  of  exchange,  and  "note"  means  negotiable 
promissory  note. 

"  Delivery "  means  transfer  of  possession,  actual  or  constructive, 
from  one  person  to  another. 

"Holder"  means  the  payee  or  indorsee  of  a  bill  or  note,  who  is 
in  possession  of  it,  or  the  bearer  thereof. 

"  Indorsement "  means  an  indorsement  completed  by  delivery. 

"  Instrument "  means  negotiable  instrument. 

"  Issue "  means  the  first  delivery  of  the  instrument,  complete  in 
form  to  a  person  who  takes  it  as  a  holder. 

"Person"  includes  a  body  of  persons,  whether  incorporated  or 
not. 

"  Value  "  means  valuable  consideration. 

"  Written  "  includes  printed,  and  "  Writing  "  includes  print. 

Sect.  208.  The  person  "  primarily  "  liable  on  an  instrument  is 
the  person  who  by  the  terms  of  the  instrument  is  absolutely  required 
to  pay  the  same.    All  other  parties  are  "  secondarily  "  liable. 

Sect.  209.  In  determining  what  is  a  "reasonable  time"  or  an 
"  unreasonable  time  "  regard  is  to  be  had  to  the  nature  of  the  instru- 


BILLS   OF  EXCHANGE.  497 

ment,  tBe  usage  of  trade  or  business,  if  any,  with  respect  to  such 
instruments,  and  the  facts  of  the  particular  case. 

Sect.  210.  Where  the  day,  or  the  last  day,  for  doing  any  act 
herein  required  or  permitted  to  be  done  falls  on  Sunday  or  on  a  holi- 
day, the  act  may  be  done  on  the  next  succeeding  secular  or  business 
day. 

Sect.  211.  The  provisions  of  sections  eighteen  to  two  hundred 
and  ten,  inclusive,  and  the  following  section  do  not  apply  to  nego- 
tiable instruments  made  and  delivered  prior  to  the  first  day  of 
January  in  the  year  eighteen  hundred  and  ninety-nine. 

Sect.  212.  In  any  case  not  provided  for  in  sections  eighteen  to 
two  hundred  and  eleven,  inclusive,  the  rules  of  the  law  merchant 
shall  govern. 


32 


INDEX. 


[References  are  to  PAOEa.] 


A. 

ABSCONDING, 

as  excuse  of  presentment,  216,  299. 
ABSENCE   OF  MAKER, 

from  home,  277-283. 
ABSOLUTE   DEFENCES, 

fraud  in  regard  to  nature  of  contract,  360-366,  404. 

paper  void  by  statute,  369-371,  418,  422. 

want  of  capacity,  408. 

want  of  delivery,  430-437. 

fraud  in  obtaining  possession  of  paper  not  delivered,  430-437. 

fraud  in  filling  blanks  in  completed  paper,  444-456. 

alteration.     {See  Alteration.) 

forgery  of  signature.     (^See  Forgeby.} 
ACCEPTANCE, 

nature  of  contract,  85. 

proper,  87-90. 

written,  87. 

words  of,  87. 

by  stranger,  88. 

for  honor,  88. 

virtual,  90-95. 

on  separate  paper,  90. 

promise  of,  90,  95-107. 

by  conduct,  107-111. 

funds,  111. 

admits  drawer's  signature,  113-115,  122,  123. 
but  not  body  of  bill,  121-124. 

rule  that  acceptance  admits  drawer's  signature  qualified,  115-121. 
ACCIDENT, 

inevitable,  as  excuse  of  steps,  292-299. 
ACCOMMODATION   PAPER, 

natui-e  of,  316. 

notice  to  purchaser,  316-319. 

of  fraudulent  diversion,  319-321. 

taken  after  maturity,  322-327. 

English  rule  different  from  American,  323-325. 

releasing  drawer  of  bill  accepted  for  drawer's  accommodation,  348-351, 
355. 


500  INDEX. 

[References  are  to  pages.] 

ADMINISTRATOR.    (See  Executor.) 
AGENCY, 

delivery  by,  28. 

form  of  signature  by  agent  to  bind  principal,  60. 

liability  of  agent  for  unauthorized  signing  for  alleged  principal,  64,  69. 

exempting  agent  from  liability,  66-68. 

agent  treated  as  principal  as  to  time  of  notice  of  dishonor,  265,  276. 
ALTERATION, 

right  of  bona  fide  holder  to  recover  on  altered  instrument,  437,  438,  443 
449.  * 

raising  sum,  437,  438,  449-456. 

immaterial,  439-442. 

cases  reviewed,  440-442. 

of  instrument  negligently  drawn,  442. 

facilitating,  444-456. 

adding  words  in  blank  left  in  completed  instrument,  444-448. 

rule  of  two  innocent  persons,  446,  447. 

(See  Forgery.) 
ANNE,  STATUTE   OF,  15,  16. 
ANOMALOUS  SIGNATURE, 

before  that  of  payee,  71-83. 

Massachusetts  rule,  73. 

New  York  rule,  78. 

Vermont  rule,  71. 

statute  rule,  78. 
ASSURER.    {See  Guaranty  and  Suretyship.) 

B. 

BAD  FAITH, 

taking  paper  under  circumstances  of  negligence,  not,  388-393. 
BANK, 

debtor  of  depositor,  125-128. 

liability  of,  for  dishonoring  cheque,  125-131. 

paper  payable  at,  222-224. 

BANK-NOTES, 

stolen  before  delivery,  436. 

BEARER, 

instrument  payable  to  fictitious  person,  payable  to,  55-59. 
BILL  OF   EXCHANGE, 

form  of  order  in,  42. 

BLANK  INDORSEMENT. 

form  of,  174-177. 
effect  of,  174-177. 

BLANK  SPACES, 

authority  to  fill  up,  26. 

filling  of,  fraudulently,  in  completed  paper,  444-448. 
BONA   FIDE  HOLDER, 

who  is,  372. 


INDEX.  501 

[References  are  to  pages.] 

BURDEN  OF  PROOF, 

in  case  of  duress,  fraud,  or  illegality,  457-460. 
in  case  of  want  of  consideration,  458. 

BUSINESS  PLACE, 

what  constitutes,  220-222. 
temporary  stay  in  a  town,  277-283. 

c. 

CAPACITY, 

admission  by  indorser  of  capacity  of  prior  party,  195-197. 

want  of,  absolute  defence,  408. 
CARPENTER'S  WORK, 

paper  payable  in,  43. 
CERTAINTY, 

of  payment,  45-49.  ^ 

of  time,  45,  53. 

of  sum,  50. 

CERTIFICATION, 
Of   Cheque, 

bank  not  liable  until,  125. 

by  drawer  for  himself,  131-134. 

by  payee  or  holder,  131-134. 

not  acceptance  of  a  bill,  133. 

nature  of,  134. 

does  not  admit  funds  conclusively,  134. 
Of  Notes,  134. 
Of  Acceptances,  137. 

CHEQUE, 

presentment  of,  230-233. 

not  properly  a  bill  of  exchange,  133. 

certifying,  131-134. 
COLLATERAL  SECURITY, 

paper  held  as,  46,  372-388. 
COMPETENCY, 

of  party  to  paper  to  prove  invalidity,  201-204. 
{See  Capacity.) 
COJ^IPOSITION  DEED, 

with  reservation  of  remedies,  342-347. 

CONDITION, 

delivery  upon,  30-39. 

which  negatives  possible  liability,  38. 

paper  held  as  security,  46. 

CONGRESS, 

residence  of  member  of,  277-283. 

CONSIDERATION, 

presumption  of,  8-20. 
in  guaranty,  328-330. 
statement  of,  in  guaranty,  328-330. 


502  INDEX. 

[References  are  to  pages.] 
CONSIDERATION  —  continued. 

distinction  between  guaranty  subsequent  and  guaranty  contemporaneous, 

328-330.    (See  Valuable  Consideration.) 
illegal,  457-460. 
valuable,  372-388. 
CONSTITUENT.    (See   Principal.) 

CONTINGENCY, 

instruments  payable  on,  not  negotiable,  45-53. 

CONTRACT, 

persons  not  parties  to,  97-100. 
CUSTODIAN, 

delivery  by,  28. 
CUSTOM  OF  MERCHANTS,  1-14. 


D. . 

DAMAGE, 

question  of,  on  want  of  notice  of  dishonor,  304-305. 

DATE, 

as  evidence  of  place  of  payment,  213-220. 

DEATH, 

of  maker  as  excuse  of  steps,  300-304. 
DELIVERY, 

definition,  21. 

by  negligence,  23. 

want  of,  not  a  defence  against  a  honafide  holder,  427-430. 

necessary  to  liability  even  as  to  honajide  holder  for  value,  430-437. 

obtained  fraudulently,  427-437. 

rule  in  regard  to  innocent  persons  one  of  whom  must  bear  the  loss,  433. 

lost  or  stolen  paper  once  delivered,  427-437. 

stolen  bank-notes,  not  delivered,  436. 
DEMAND.     {See  Presentment  and  Demand.) 
DILIGENCE, 

reasonable,  enough,  283-288. 
DISCHARGE.     (See  Payment.) 
DISCHARGE  OF  SURETY, 

agreement  for  time,  331-337. 
DRAWEE, 

may  become  holder  and  sue  on  the  paper,  85-87. 

bound  to  know  drawer's  signature,  113-115. 

except  when,  115-121. 

aliter  of  body  of  bill,  121-124. 

DRAWER'S  CONTRACT, 

drawer  of  bill,  presumptively  entitled  to  notice,  152. 

drawer  of  cheque  presumptively  entitled  to  notice  of  dishonor,  156-160. 

drawer  of  cheque  not  prejudiced  by  want  of  notice,  159-160. 

time  for  presenting  demand  draft,  227-230. 

time  for  presenting  cheque,  230-232. 


INDEX.  503 

[References  are  to  pages.] 

DRAWER'S  SIGNATURE, 

acceptance  an  admission  of,  113-115. 
qualification  of  rule,  115-121. 
DURESS, 

not  available  against  honajide  holder,  407-414. 
burden  of  proof  where  paper  was  executed  under,  460. 

E. 

EQUITIES, 

not  available  against  honajide  holder  for  value,  372,  404-430. 

set-off  not  an  equity,  424-427. 
ESTOPPEL, 

negligence  in  delivery,  435. 

facilitating  alterations,  444-456. 

paying  forged  bills,  366-368. 
EVIDENCE, 

parol,  to  control  indorsement,  184-189, 
EXCHANGE, 

added  to  promise,  50. 
EXCUSE   OF  NOTICE, 

no  damage  by  want  of  notice,  304. 

by  waiver,  307-311. 

does  not  excuse  presentment,  307. 
EXCUSE  OF   PRESENTMENT, 

absconding,  216. 

inevitable  accident,  292-299. 

mistake  of  post-office,  292-299. 

excuse  of  notice,  not  an,  307,  308. 
EXECUTOR, 

personal  liability  of,  on  negotiable  paper,  69. 

consent  of,  to  make  title,  181-183. 

indorsement  by,  181,  note. 

period  of  exemption  from  suit,  302. 

notice  of  dishonor  to,  before  qualification  good,  267,  268. 

F. 

FORBEARANCE, 

agreement  for,  339-347. 
FOREIGN  BILLS, 

history  of,  1-14. 
FORGERY, 

of  signature  before  defendant's,  195,  196. 

of  drawer's  signature  may  not  be  shown  by  drawee,  113-115 

of  body  of  bill  may  be  shown,  121,  124. 

of  acceptor's  signature  an  absolute  defence,  366-368. 

paying  forged  paper  as  an  estoppel,  366-368. 

rule  of  two  innocent  persons,  433,  446. 

raised  sum,  and  suit  to  recover  original  amount,  437,  438,  449-456. 

negligence,  442-456. 

adding  words  in  blank  left  in  completed  instrument,  444-448. 
(5ee  Alteration.) 


504  INDEX. 

[References  are  to  pages.] 

FRAUD, 

in  regard  to  nature  of  contract,  360-366,  406. 

in  reading  or  stating  contract,  363-364. 

upon  illiterate  person,  3G3,  365. 

in  obtaining  paper  not  delivered,  427-437. 

inducing  contract,  381,  382,  404-407. 

in  filling  blank  in  completed  instrument,  444-456. 

FUNDS, 

admission  of,  by  acceptor,  111-113,  119-121. 

admission  of,  by  certifier,  134-137. 

what  meant  by  having,  155-159,  161,  162, 


G. 

GENUINENESS.     (See  Acceptance;  Alteration;  Forgery.) 
GOOD  FAITH, 

taking  paper  under  circumstances  of  negligence,  388-393. 
of  holder,  time  of  determining,  393-396. 
taking  by  holder  presumed  to  be  in,  457-460. 

GRACE, 

abolished  by  Statute,  237. 

on  instalment  notes,  237-239. 

demand  on  last  day  of,  270. 
GROSS  NEGLIGENCE, 

in  taking  paper  not  bad  faith,  391-393. ' 
GUARANTY  AND  SURETYSHIP, 

consideration  for  guaranty,  328-330. 

guaranty  subsequent,  328-330. 

guaranty  contemporaneous,  328-330. 

statement  in  writing  of  consideration,  328-330. 

liability  of  guarantor,  331-335. 

discharge  of  surety  or  guarantor,  331-337. 

indorser  as  surety,  338. 

discharge  of  indorser,  338. 

agreement  to  give  time  to  principal  debtor,  339-347. 

accommodator  as  surety,  348-357. 


H. 

HISTORY, 

of  custom  of  merchants,  1-14. 
HOLDER  FOR   VALUE, 

paper  taken  for  pre-existing  debt,  372-388. 

{See  Valuable  Consideration.) 
HOLDER'S  POSITION, 

who  is  holder,  358-360. 

presumptive  right  of  action,  358-360. 

equities  and  set-o£E,  358-360. 


INDEX.  505 

[References  are  to  pages.] 

I. 

ILLEGALITY, 

competency  of  indorser  to  prove,  in  contract  of  prior  party,  201-204. 

when  absolute  defence,  369-372,  418. 

when  an  equity,  414-423. 

of  consideration,  457-460. 
ILLITERATE   PERSON, 

fraud  upon,  363,  365. 
INDORSEMENT, 

anomalous,  71-83. 

necessity  of,  163-168. 

holder  of  unindorsed  paper  payable  to  order,  163-167. 

not  necessary  on  instrument  payable  to  bearer,  167. 

form  of,  168. 

what  constitutes,  169-172. 

special,  172-174. 

after  maturity,  ]  72-174. 

in  blank,  174-177. 

restrictive,  177-180. 

for  collection,  177-180. 

by  whom,  181-183. 

incidents  of ;  warranties;  admissions,  195-204. 

as  an  order,  218. 

made  in  cipher,  168. 

control  of,  by  parol  evidence,  184-189. 

joint,  245. 

obtained  by  fraud  as  to  nature  of  contract,  360-366. 

induced  by  fraud,  404-407. 
INDORSER'S   CONTRACT, 

stated,  205,  206,  272. 
INEVITABLE   ACCIDENT, 

as  excuse  of  steps,  292-299. 

duty  after  obstacle  ceases,  297,  298. 
INLAND   BILL, 

history  of,  1-14. 
INSANITY, 

makes  contract  voidable,  409. 
INSTALMENT    NOTES, 

negotiability  of,  237-241. 

grace  on  instalments,  237. 
INUREMENT, 

of  notice  by  indorser  in  favor  of  holder,  263. 

J. 

JOINT   INDORSEMENT, 
what  constitutes,  470. 


606  INDEX. 

[References  are  to  pages.] 

L. 

LAW  MERCHANT, 

what  constitutes.  1-7. 

presumptive  liability  of,  changed  by  common-law  judges,  8-14. 
LEGAL  OR  ABSOLUTE  DEFENCES,     {See  Absolute  Defences.) 
LOST  PAPER, 

presentment  of,  211-213. 

protest  of,  211-213. 

honajide  holder  for  value  of,  434,  435. 

M. 

MAIL, 

misdelivery  by,  292-299. 

notice  of  dishonor  by,  268-277. 

{See  Post-Office.) 
MAKER, 

contract  of,  83. 

notice  that  his  note  is  lodged  in  bank  for  collection,  221,  224-226. 
MATURITY, 

negotiable  paper  overdue  does  not  lose  negotiability,  172-174. 

accommodation  paper  taken  after,  322-327. 
MEMBER   OF   CONGRESS, 

residence  of,  280,  281. 
MISTAKE, 

money  paid  by,  in  case  of  forgery,  113-124. 

money  paid  in,  as  to  funds,  by  bank,  141-151. 

of  post-ofiice  as  excuse  of  steps,  292-299. 

in  notice  of  dishonor,  251-254. 
MONEY, 


carpenter's  work  not,  43. 


N. 


NEGLIGENCE, 

in  regard  to  delivery,  23. 

in  regard  to  blanks,  26. 

of  coUectiiig  bank  in  presenting  paper,  222-224. 

in  not  reading  contract,  365. 

in  taking  negotiable  paper  not  bad  faith,  388-393. 

in  drawing  instrument  materially  altered,  442. 
NEGOTIABILITY, 

does  not  cease  at  maturity,  172-174. 
NOTARY, 

certificate  of,  as  evidence,  288. 
NOTICE  OF  DISHONOR, 

necessity  of,  to  charge  indorser,  248-254, 

knowledge  not  equivalent  of,  248-250. 

form  and  contents  of,  251-263. 


INDEX.  507 

[References  are  to  pages.] 

NOTICE  OF  DISHONOR  —  con/muerf. 

to  drawer  having  no  funds,  152-159. 

reasonable  ground  to  draw,  155,  158,  161-162. 

drawer  of  cheque  presumptively  entitled  to,  156. 

mistakes  in,  251-254. 

not  necessarily  fatal,  251-254. 

object  of  notice,  253. 

what  it  should  show,  253,  255. 

mere  notice  of  non-payment,  253-258. 

cases  reviewed,  256-260. 

inurement  in  favor  of  holder,  263-265. 

by  party  to  instrument,  263-265. 

by  agent,  265,  266. 

to  whom,  265-267. 

how  given,  268. 

■when  to  be  given,  269-277. 

where  to  be  sent,  277. 

excuse  of,  292. 
NOTICE   OF   EQUITIES, 

taking  accommodation  paper  with  notice  of  fraudulent  diversion,  319-32L 

taking  accommodation  paper  after  maturity,  322-327. 

holder  with,  taking  from  one  who  had  no,  396-404. 

0. 

«'0N  OR  BEFORE," 

payment  so  provided,  45,  53. 

P. 

PARTNERS, 

presentment  upon,  24^248. 
PAYEE, 

in  alternative,  43. 

administrator  as,  54. 

fictitious,  55. 
PAYMENT, 

"on  or  before,"  45,  53. 

out  of  particular  fund,  47. 

discount  of  bill  by  drawee  not,  85-87. 

place  of,  213-220. 

■when  to  be  made  and  how,  in  case  of  negotiable  paper,  461-466. 

by  indorser  for  his  own  release  merely,  466-470. 

holder  may  recover  full  sum  of  maker  or  acceptor  in  such  case,  466-470. 

by  indorser  on  behalf  of  maker  or  acceptor,  466-470. 

by  secondary  party,  470. 
PERSONAL   REPRESENTATIVES, 

notice  of  dishonor  to,  267. 
PLACE   OF   PAYMENT, 

paper  payable  in  another  State,  213-220. 

payable  generally,  216. 


508  INDEX. 

[References  are  to  pages.] 

PLACE  OF   PAYMENT  —  conimwerf. 
absconding,  216. 

seamen,  216. 

no  known  residence,  216. 

removal,  217,  218. 
POST-OFFICE, 

mistake  of,  as  excuse  of  steps,  292-299. 

notice  of  dishonor  through,  268-277. 

posting  letter  containing  notice  may  be  enough,  268 
PRE-EXISTING   DEBT,  372-388. 
PRESENTMENT  AND   DEMAND, 

necessity  of  presentment,  205-210. 

possession  of  paper  necessary  to  make,  211-213. 

place  of,  213-220. 

excuse  of,  216. 

paper  payable  generally,  216,  224-226. 

absconding,  216. 

seamen,  216. 

no  known  residence,  216. 

removal,  217,  218. 

of  instrument  payable  at  bank,  222-224. 

of  cheque,  when,  230-233. 

of  demand  notes,  233-237. 

of  instalment  notes,  237-241. 

of  sight  bills,  when,  227-233. 

at  near  midnight,  242,  243. 

reasonable  hour,  242-244. 

business  hours,  242. 

in  evening,  242-244. 

of  partnership  paper,  245-248. 

in  case  of  joint  promise,  245-248,  314-315. 

paper  payable  at  designated  place,  259,  307,  308. 

excuse  of,  292-306. 

(See  Excuse  of  Preskntment.) 
PRESUMPTION, 

from  fraud,  duress,  or  illegality,  457-460. 
PRINCIPALS, 

undisclosed,  60. 

how  bound  by  agent,  60-70. 
PROMISE   TO   ACCEPT, 

as  virtual  acceptance,  90-95. 

description  of  paper,  95,  100-102. 

as  common-law  contract,  95-107. 

not  negotiable,  9.5-100. 

■who  may  have  benefit  of,  95-100. 

how  it  differs  from  acceptance,  95-100. 

as  affected  by  the  Statute  of  Frauds,  105-107. 
PROMISE   TO   PAY, 

as  waiver  of  steps,  312-315. 
PROMISSORY  NOTE, 

form  of,  40. 

history  of,  1-14. 


INDEX.  509 

[References  are  to  pages.] 

PROTEST, 

certificate  of,  as  evidence,  205-210. 

form  of,  206. 

vphat  it  should  state,  206. 

Louisiana  law  of,  207-210, 

of  lost  paper,  211. 

necessity  of,  288. 

of  inland  bills  and  notes,  288. 

as  evidence  of  the  taking  of  steps,  288-292. 

e".icuse  of,  292. 

waiver  of,  308. 
PURCHASER, 

from  bona  fide  holder,  rights  of,  396-404. 

where  purchase  is  after  maturity,  398-404, 
PUTTING  UPON  INQUIRY, 

negligence  in  taking  paper,  288-293. 


R. 

READING  CONTRACT, 

fraud  as  to,  360-365. 

negligence  in  failing  to  read,  365,  366. 
REASONABLE   DILIGENCE, 

to  find  maker,  283-287. 

what  is,  in  sending  notice  of  dishonor,  287,  288. 
REASONABLE   GROUND, 

for  drawing  bill  or  cheque,  152-159. 
REASONABLE    TIME, 

for  presenting  sight  bill,  227-233. 
RELEASE, 

of  debtor  as  discharge  of  surety,  335-337. 

of  prior  party  may  discharge  later,  338. 

unenforceable  agreement  to  release  prior  party  does  not  discharge  surety, 
339-342. 

reserving  remedy  against  later  party,  342-344, 

technical  sense  of,  346. 

releasing  drawer  of  bill  accepted  for  drawer's  accommodation,  348-357. 
REMOVAL, 

as  excuse  of  presentment,  217,  218. 
REPRESENTATIVE,     {See  Agency.) 
RESIDENCE, 

reasonable  diligence  to  find  maker's,  277-283. 

temporary  absence  from,  280-283. 

of  member  of  Congress,  280,  281. 
RESTRICTIVE    INDORSEMENT, 

effect  of,  177-180, 


510  INDEX. 

[References  are  to  pages.] 

s. 

SEAMEN, 

having  no  known  place  of  residence,  216. 
SEASONABLE   NOTICE, 

what  is,  269-277. 
SECURITY, 

paper  held  as,  46,  372-388. 
SET-OFF, 

not  available  against  bona  fide  holder  for  value,  358-360. 

available  against  a  purchaser  after  maturity,  424. 

not  an  equity,  424-427. 
SIGHT   BILLS, 

to  be  presented  when,  227-233. 
SIGNATURE, 

by  representative,  60-70. 

in  cipher,  168. 

of  drawer.     (See  Acceptance.) 
STATUTE, 

of  Frauds  as  applying  to  oral  promise  to  accept  bill  of  exchange,  105. 

declaring  paper  void,  369-372,  414-421. 

Sunday,  422,  423. 

usury,  189,  371,  410. 
STOLEN   PAPER, 

bona  fide  holder  for  value  of,  23-28,  427-437. 

stolen  bank-notes,  not  delivered,  436.  \ 

SUNDAY, 

paper  delivered  on,  422,  423. 
SURETYSHIP.     {See  Guaranty  and  Suretyship.) 
SURRENDER   OF   PAPER, 

on  payment,  461-467. 
SUSPICION, 

taking  paper  with  suspicion  of  equities,  392,  note. 


T. 
TIME, 

"  on  or  before,"  45,  53. 

certainty  of,  45,  46,  53. 

of  presenting  demand  paper,  227-237. 

of  presentment,  general  rule,  295. 

of  notice,  269-277. 

agreement  for  time  to  principal  debtor,  339-341. 
TRANSFER, 

a  question  of  control,  21. 
TRUSTEES, 

exempting  themselves  from  liability,  66-68. 


INDEX.  611 

[References  are  to  pages.] 


u. 


USURY, 

right  of  indorser  to  prove,  in  maker's  contract,  201  -205. 
paper  void  for,  is  void  in  hands  of  bona  fide  holder  for  value,  189,  371, 
410. 

V. 

VALUABLE   CONSIDERATION, 

holder  for,  372-388. 

paper  taken  for  pre-existing  debt  or  as  collateral  security,  372-388. 
New  York  rule,  372-381. 
rule  in  United  States  courts,  381-388. 
VENDOR, 

warranties  of,  189-195. 
VOID, 

paper  so  declared  by  statute,  369,  371,  418,  422. 

paper  void  because  of  usury,  189,  371,  410. 
VOIDABLE, 

paper  delivered  on  Sunday,  422,  423. 


w. 

WAIVER, 

by  primary  party,  306. 

waiving  notice  not  an  excuse  of  demand,  307. 

oral,  308-311. 

promise  to  pay  before  or  after  maturity,  312-315. 

knowledge  of  facts,  314,  315. 

{See  Excuse  of  Notice;  Excuse  of  Presentment.) 
WARRANTIES, 

by  vendor,  189-195. 

by  qualified  indorser,  194. 


no' 


J 


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